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Debate!

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I'll get my brownie recipe from Patrice Carden!

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It's an snowy day in Minyanville and as the tape plows through the early afternoon action, I've asked Hoofy and Boo to face off for an intraday debate. They've both been relatively vocal in their opinions but the market is a dynamic animal and, as such, it's always good to get a fresh read. Let's take a listen:

Hoofy: Dude, do us all a favor and accept your fate. Iraq folded faster than origami and that was the great unknown overhanging the market. Don't be stubborn. As Henry Hill used to say, we've all gotta take a beating sometimes. You were overdue. Suck it up and move on.

Boo: You're such a dope, Hoofy. We've had the exact same conversation after every single rally the last few years. You always pin your fortunes on something and Iraq is simply the latest poster child of hope. Let me ask you a question: If you took a running start and slammed head first into a brick wall, how many times would it take before you realized the wall wasn't going anywhere?

Hoofy: Wow. You're calling me a dope? Earth to Boo! While you've been on your furry rant, you've missed a heckuva rally. The signs were there: The dollar was firm and treasuries have been week. That's led to some internal technical improvements that portend higher prices. Why are you getting so emotional? Listen to what the market is telling you, Boo. You don't have to agree but you should always hear what she's saying.

Boo: Doesn't it worry you that despite the spirited sprint, we're still firmly below the down trendline in the major averages? All the while, the sentiment pendulum has swung hard to the right (hope) and the best case is being assumed on a global basis. That's been a very dangerous place to be the last few years cookie. And unless you're gonna make the case that this is a new bull market, you should be selling rather than buying.

Hoofy: What if you're wrong Boo? Are you ready to bet your bottom dollar that this is a massive head fake?

Boo: Ask yourself that very same question, Hoofy. You're the one who's buying this hook, line and sinker. My only point is that we've seen this movie before and every time we do, you expect a happy ending. The tape acts great -- I'll give you that -- but does that mean you'll become less bullish if we start to trade lower?

Hoofy: I'll employ the same strategy you're using Boo. With volatility as (relatively) cheap as it is, I can always replace my long stock with call options. This way, if the market does reverse sharply lower, I'll have defined my risk profile.

Boo: That's not the dumbest thing you've ever said, Hoofy. If (big IF) you want to hedge yourself at a point, you can short some common stock (on a ratio) against those calls and set up some gamma of your own. THAT is smart trading. And I'm sorry for calling you a dope... I've been a bit on edge lately.

Hoofy: No problem boss... I understand. Why don't you swing by my place tonight and we'll watch the Syracuse game. I'm have a bunch of critters over and Daisy is cooking up some of her special brownies. You should come. It's important to balance and get your mind off the tape at times.

Boo: Thanks Hoofs -- you're a good... bull. I've gotta hop and take a fresh read. I know that markets that are up all day tend to end that way. If we don't begin to fill the downside gap soon, it may be a long afternoon. Still, and so you know, I'm in a position to add to my defined risk May puts if that happens. Despite the green seas, I'm viewing rallies as an opportunity to add to my shorts.

Hoofy: Good luck... and may the Shwartz be with you!

With that, the two of them jumped up and made their way out of my office. With a little over two hours left in the trading session, it was time to bear down and focus. We were slated to meet at Hoofy's in a few hours time and there was plenty of work left to do before the opening tick, er, tip.

Good luck, my friends.
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