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Freaky Friday Potpourri: Reality Bites


Cameras are always on in the 'Ville.


"We've become bored with watching actors give us phony emotions. We are tired of pyrotechnics and special effects. While the world he inhabits is, in some respects, counterfeit, there's nothing fake about Truman himself. No scripts, no cue cards. It isn't always Shakespeare, but it's genuine. It's a life." --Christof, The Truman Show

Good morning and welcome back to the Freak that is Friday. Following the first full week of Minyanville's Buzz & Banter LIVE on The Fox Business Network (11:30 EST, 3:00-4:00 EST), we flip lids to juggle the struggle that is May expiration. It's been a helluva week, Meryl, and we've got six short hours before our requisite two-day respite begins!

The plot of the week has been the perfect storm of technical convergence and negative gamma. S&P 1405, INDU 12800, Russell 735 and NDX 2000 were at the forefront of trading mindshare when they popped through on Wednesday and dropped back into the close.Textbook technical analysis dictates that the time to buy acne is on the retest of the breakout and reactive masses followed that script yesterday.

While that lift seemed fragile, suspect and somewhat mechanical, back-to-back ursine attacks were entirely too easy. Today's expiry will bury front month index paper on the opening and individual equity options on the close. From there, the markets will trade more naturally, although I'm conscious that "natural" is a relative term in today's day and age.

I've been respectful of the push higher and have attempted to use price-along with the drop in volatility-to my advantage while rotating risk and squirreling shekels. There are flies in the upside ointment (put/call, VXO 17, sentiment) and I'll again note that the imbalances are cumulative and risk is high. That doesn't mean it'll manifest, mind you, but we should manage the process accordingly. The mechanics of the swing always trump the results of the at-bat.

As Far As My Positions…

After peeling out of my Schlumberger (SLB) puts (into the $4 drop yesterday), my plays in the energy space are Halliburton (HAL) (long puts) and Continental Airlines (CAL) (long calls). They're pure trades with defined risk and both will start the day with a crimson twist.

Away from commodity plays, I went home long a snivlet of Apple (AAPL) puts (with a stop on the other side of $193 and a conscious nod to $190 pin risk), my requisite paper plays (McClatchy (MNI) and Gannett (GCI), although the latter position has been pared as a function of the 20% run since late April) and some tertiary risk in VIX (trying it), Hewlett Packard (HPQ) (will be pared near opening) and some "situational risk."

Random Thoughts

  • Hello, Old Friend! The S&P 200-day moving average (1428) is nestled slightly above current levels and we haven't touched that pup thus far this year.

  • As Professor Jeff Cooper said on this mornings Buzz, "The first time the 200-dma is tagged after a long period without visiting it is almost always a sell. The ensuing behavior then tells the tale as to whether the decline is a simple correction or something more sinister."

  • The FT article regarding the ECB having "high concern" that there's a "liquidity scheme" in play by banks involving "a specific deterioration of capital" in collateral which is being accepted in return for funds warrants a noodle this morning.

Answers I Really Wanna Know…

  • I wonder what Terrance McQuewick thinks of Sloane's GQ spread?

  • Are you trading smaller size as a function of volatility?

  • Why do I again have more positions than a nymphomaniac at a Kama Sutra convention?

  • With most of them via options with hopes of winning two ways (direction, volatility expansion)?

  • Are we gonna tag a six-figure MinyanLand population by the end of this week?

  • How do you shoot the devil in the back? What if you miss?

  • Was it really just Wednesday when I offered that a "long metals, short energy" pairs trade might make sense?

  • And I didn't slap it on why?

  • If the debt bubble took many years to form, what makes you think that we can emerge from the credit crunch thisquick?

  • OK, fair nuff-but what were your thoughts on tech in 1999? How 'bout real estate in 2005?

  • If we don't learn from the past, aren't we destined to repeat it?

  • Is anyone else ready for some football?

  • How do I reconcile my short-side vibes in energy with the persistent inkling that geopolitical tension is gonna uptick in Iran?

  • Can anyone say Friday Night Face Plant?


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Position in CAL, HAL, MNI, GCI, AAPL, HPQ, VIX
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