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Risk into the Weekend


There'll be opportunities aplenty next week.


"I don't puke when I drink. I puke when I don't." Roy Munson

As red spreads and angst threads, confidence in the bull case is starting to crack and McCrackin'. We've walked through the situation--the disconnect between credit and equity, the battle between asset class deflation and dollar devaluation, the probability that we were in a bearish churn rather than a bullish base, the inevitable blame brush, the need for new rules--and now, surreal as it is, it seems to be unfolding before our very eyes.

It's never been my style to pile on or pile in, which likely cost me coin with regard to this latest puke in the piggies. Still, while unfortunate, the action has been textbook. The big picture is made up of a series of little pictures, which is why we've been taking our journey one step at a time. For better or for worse, the mechanics of our disciplined swing will hopefully show us the way.

Given the perceived catalyst (employment report) and context (technical break below the January lows), the potential exists for a sloppy close exacerbated by forced selling and margin calls. The bull case is predicated on an invisible hand, something we must respect if not expect. I'm not a tin foil type and this isn't a conspiracy theory--Hank himself said that he tends to partake--so understand that it's part of the probability spectrum.

I continue to operate in "hit it to quit it" mode, both ways, as we dance between the elephants. Longer-term types can use down time, figuratively and literally, to build a laundry list of potential longs with hopes of using price to their advantage. Partial positions (trading "in between") might be smart (incremental exposure and leaving dry powder for lower prices still) but that's a function of unique time horizon and risk profile.

For what it's worth, my sense is that we'll have plenty of time to buy stocks on sale next week and I, for one, don't plan to lug risk home for the weekend (either way). It's been a long week, I know, but keep your keppe straight. The decisions you make in the next hour will define your risk profile come Monday.

As always, I hope this finds you well.


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