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Random Thoughts

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The reaction to news is more important than the news itself.

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  • We edge into the afternoon with the S&P on the bottom end of an all-important zone. As many Minyans know, I entered today's fray skewed slightly short, albeit nothing that would warrant the fur. I also have positive gamma, or "long convexity" (options), so the 10% drop in the VXO does not escape me.

  • While I respect my tea leaves, namely the breadth (3:1 big board), financials (the BKX is back at the 200-day and the brokers have a bid), the nets (up 2-3% across the board), the potential for monthly inflows and the emerging markets (EEM +1.5%), I added a round of index puts against my core longs and will lean against the aforementioned level. I may be spitting in the wind but our goal, as traders, is to attempt to use prices to our advantage in the context of defined risk.

  • Other guides from where I'm sitting include crude (-2.3%, whereas a rally would indicate increased geopolitical tensions), GS $210 (a level of resistance for the biggest baddest broker in the land) and the homies (which are thus far back above our aforementioned kill zone).

  • Can you imagine getting married at the FOMC? "I do…contingent on continued prosperity. However, I reserve the right to reverse course and should unwanted influences begin to emerge."

  • Tapes that are strong all day tend to end that way. This, we know, particularly when breadth is skewed 2:1 positive. I'm unsure if a reversal is today's business (it doesn't feel that way) but, with the VXO trading with a 12-handle, I don't mind accumulating volatility.

  • I see SunMicro's break of the sexy six level but I'm still there with my "core" vs. other short exposure. Undisciplined? Rationalization? Jerky? Nah, I use technicals as a context rather than an absolute trigger. There are four primary metrics---fundies, structural, psychology and technicals. Good charts certainly help but they are by no means a panacea.

  • Ya gotta hand it to the Gators for back-to-back nets and a pigskin trophy to boot. Nothing but respect, Mon, for the best college sports program in the land.

  • The reaction to news is more important than the news itself.

  • It's a short week as we've got holidays on both sides of the ride. Trade as you will and trade as you want but ready yourself for increased volatility and thinner markets. The last thing you wanna do is ruin the important stuff with silly mistakes or unnecessary losses.


R.P.

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