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The Battle Moil

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Be on the ball!

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"I like to keep mine razor sharp. Sharp enough you can shave with it. Why, I've been known to circumcise a gnat. You're not a gnat are you Bug? Wait a minute, bug, gnat. Is there a little similarity? Whoa, I think there is! Ha ha ha. You understand what I'm talking about? I don't think you do. I'll be right back."

--Uncle Buck


The afternoon fray has been led astray as the critters all wonder what Elmer will say. There's no doubt that the bespeckled Fed chief is the collective focus but you gotta wonder if folks are being a bit granular with regard to his imminent directive. We see it during every FOMC meeting when words like "foreseeable" and "patience" are dissected to the point of exhaustion. Now, with two full days on the soap box, Forrest Gumspan (as BM liked to say) will open up his thesaurus and do it again.

While yields are a relative inflection point (TNX), I'm not downplaying his potential impact. In fact, his soliloquies will likely remove the "big bad unknown" from the path of least resistance. Therein lies the crux of our decision making process: What IS that path and how can we best walk down it. A case can certainly be made both ways so in the interest of fairness, I wanted to give both Hoofy and Boo their respective 15 minutes.

The bodacious bovine will correctly point out that the broader market digested a 50 handle BKX plunge (old way) with nary a burp. "Stocks just don't go down well," he's quick to point out, "and this basing was a necessary precursor to a push through major resistance (which, once removed, will resume the equity migration). Further, he'll correctly remind us that the corporate bond market has yet to raise a flag and that typically precedes a shift in landscape.

The ursine ugly, for his part, is happy to dust off his master list. "Widespread complacency? Check. Crowded longs? Check. Stimulus fumes? Check. Cracks in the momentum mojo? Check. Looming resistance? Check. Insider selling? Check. Underappreciated geopolitical risk? Check. Volatility in other asset classes? Check. Do you really want me to go on? I'm happy to do so until we reach check, mate". I would, Boo, but I'm on a deadline--Elmer awaits.

For my part, I've tightened up the risk parameters and time horizon on my trading positions. So you know, and if you care, I'm content and comfortable with flattish deltas and positive gamma. I have a slight short-side bias but it's uber-contained and, for the most part, situation specific. And I've got my laundry list ready (both ways) should my patience, in fact, provide the entry points that I've been eyeing.

Good luck, Minyans, and think positive--it all starts with YOU.

R.P.
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