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The Erogenous Zone


May peace be with you!


Didn't I tell you
What I believe
Did somebody say that
A love like that won't last


The love affair continues as traders probe the G-Spot (S&P 1000) in search of a reaction. The smitten kittens have thus far bitten but, as we all know, relationships take work. If the Minx is to hug and squeeze the shorts, she'll need to establish trader's trust with an upside thrust.

The Semis and Industrials both did their part today and we must respect the fresh signals. I don't believe the hype but I certainly respect it and have adjusted my risk profile accordingly. My big picture bear reasoning is still very much in tact but, by adding a handful of cheapie calls, I now have the risk profile equivalent of a big "V" (positive gamma). I have, in effect, bought time (cheaply, I might add) and protected Boo should Hoofy gain momentum.

The action should pick up tomorrow as Beeks releases the housing starts (exp. 1790k), building permits (exp. 1800k) and Wolverine confidence (exp. 91.5). In addition, we'll get earnings from both Home Depot (HD:NYSE) and Hewlett Packard (HPQ:NYSE) and that should have some ripple effects through both the N's and S's.

I've spoken to a lot of traders today and the angst levels are fairly high. Before you start tossing your cookies, remember that this juncture is far from clear. We remain dead smack in the middle of the range (S&P, NDX), vols and sentiment are clearly bearish, the insider sell/buy ratio is flashing red and the market is far from cheap. Hindsight is always 20/20 but please don't turn a blind eye towards the risk. Over the long run, a balanced mindset will serve you in good stead.

Have a peaceful night.

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