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Is The Worst Over?

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...volatility will be exacerbated (both ways) into today's close.

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The following article appeared on the Buzz & Banter at 1:22 EST and we share it for benefit of the Minyanship.

"I don't wanna puke!" Marie Kimble Johnson, The Jerk

I hear ya Marie, I don't think anyone wants to puke. But anyone who has puked knows that you often feel a lot better afterward. That's the hope for the Matador Crowd right now--that the last thing a correction should feel like is that it is a correction. That it has to feel "crashy" in order to put in a near-term bottom.

That's the bull case. That, and the clinging Cliff Branch that is the double bottom in the banks. The sticky green financials will be the tell, with the benefit of hindsight, if Snapper can somehow manage to show his face.

The bear case, which you're now hearing from the mainstream media, is likely familar fare for ye faithful. We've been mapping these risks for quite some time and respect the cumulative nature of the imbalances, the proliferation of derivatives and the implications for our finance-based economy.

The "worst case" scenario is that we'll see a sloppy close and a heavy Friday, just as front-month protection expires, leading to a very tenuous weekend fret. I'm not smart enough to know whether that happens but for what it's worth--and it may not be much--I'm not playing it that way. In fact, I've been buying into this for a trade and with a tight stop.

Remember Minyans, expiration influences manifest in the days prior to the actual expiry. What that means in plain English is that volatility will be exacerbated (both ways) into today's close. I continue to feel that the Street is caught "short gamma," which means they get longer lower and shorter higher. Imagine that--it can't be a fun place to be.

As far as spying eyes, I'm watching the financials (Bear Stearns (BSC), JP Morgan (JPM), Bank of America (BAC), Fannie Mae (FNM) trade well), the metal equities (PAAS and SSRI are both down 15% as a function of perceived liquidation), the semis (still dry), the VXO (+14%, or +265% since we eyed the uptick) and the clock.

Why the clock? I've got a date with Calgon near the close. Take me away...!

R.P.

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