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A Bone to Pick

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May peace be with you!

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So the kids they dance and shake their bones,
And the politicians throwin' stones,
Singing ashes, ashes, all fall down.
Ashes, ashes, all fall down.


(Grateful Dead)


The afternoon cruise is a crimson red bruise that has woken the bears from a mighty long snooze. While pockets of green have appeared on my screen, it feels like young Boo is jacked up on caffeine. "Blame it on what you want for this spill," he said from his perch up high in the 'Ville, "but before I'm done flippin' bulls on the grill, the Minx will be force fed a most bitter pill!" It's dicey for sure so deep breaths one and all as we roll up our sleeves and get ready to brawl.

Today's action brings to light a few precious points. For one, it is a textbook example of why I have been obsessed with Citigroup (C:NYSE) as the most important stock in the equity universe. It's a simple matter of extrapolation--it leads the banks, the banks lead the S's and the S's typically dictate the tape. We noted how the stock broke multiple levels late last week and with Sandy's Wheel now testing $45 (past support/resistance), it continues to be a key to the vault.

We must also note the liquidity--or lack thereof--that is weighing on emerging markets, small caps and, well, pretty much everything else. I know we were talking about Carrie's dirty pillows for a while and, in my view, that's clearly been the driver of the asset class morass. And while it's got a LONG way to go if it is to fully unwind, the fact that the mainstream press is finally picking up on it may mean that a respite is due. It's anecdotal and nonsensical, I know, but coupled with some looming technical levels (S&P 1077), it could usher in a spate of short-covering.

The question we must all ask ourselves is what our strategy is if a) we don't get a bounce b) we get a feeble bounce or c) we get a vicious snapper. If any of the above mentioned scenarios would be a death knell, then you're clearly positioned too aggressively. The goal is to assign a probability for each and allow for a sufficient margin of error. More importantly, you want to have a cogent strategy such that when that time (or price) arrives, you're a step ahead of the crowd.

Stay on your toes into the close as chatter regarding "forced selling" is making the rounds. I have no insight regarding whether that's true but we've lived through it before and we'll surely live through it again. Markets tend to exacerbate their price action both ways--it's just the nature of the beast and the combination of the financial mechanism with human emotion. Be on the ball, Minyans, and trade to win.

As always, I hope this finds you well.

R.P.
position in c
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