Luck Is A By-Product

"If the S&P wanted to fake out and freak out some people, here and now would be a great way to do it."

With that self-written blog quote ringing in my head, I admit I got faked twice yesterday. But I did not freak out. Lucky for me, options are part of my work, so when I get faked, it's not the end of the world. Risk management is a huge part of this game. It might be said that luck is merely a by-product of how risk is managed. Maybe that's why yesterday was still an up day for me.

Some of the things that I'm noticing this morning (from Zero Hedge):

the VIX steadily rose during yesterday's session

the ECB is failing to stem reduction in lending

inventories are at an all-time high

since last November, the S&P 500 has rallied 22% - essentially unimpeded for 80 days without a drawdown

These are just a few more reasons to use options when possible, especially when they're this cheap. The VIX is not just low, it's at multi-year lows, going back to levels last seen when the S&P was at all-time highs.

Failing to cause an increase in lending is just another warning that central planning does not and cannot work -- a reduction in lending is deflationary. Deflation is what central banks fear more that being shut down.

Inventories at an all-time high warn of slack demand in the system at a time when demand should be rampant.

80 days without a drawdown means that when it happens, it will be fierce.

All this said, I still do not think the top bell has been rung. There is even room for lower prices before higher ones. There is a good zone of confluence at the 1406 area. 1386.87 is a hard stop. Momentum alone could take the indices higher for a bit. 1440.24 is the May 23 high of 2008. Why the hell not.