The Knee Jerk and Getting Lost in the Lines

First we have the mandatory Central Bank Knee-Jerk reaction, in some cases this stems from a real case of unknowing, processing, looking at the angles and finally repositioning.

In this morning's case (and it has been a VERY long night for me as I was watching the European markets until after 4 a.m. this morning to see if pre-emptive comments would be coming out), the Bloomberg leak yesterday on what Draghi would present was VERY close to being right on. In other cases the knee-jerk reaction is simply about taking advantage of others' current positioning and repositioning; when you are offered an opportunity you may have a strategic view, but the environment presents opportunities to further that strategic positioning via tactical movement (short term market action to effect longer term goals).

When I managed a high end custom furniture division's finishing department, one of the things I use to say day after day to my finishers who were creating all kinds of effects was, "Don't get lost in the lines". It becomes very easy to become fixated on detailing a small area to create an effect when what is needed is much less and the finishers simply needed to move from working from within 1 or 2 feet of the piece and step back to a distance of 15 feet and look at what needed to be done to create the desired result, they were lost in the lines.

Because the market is an emotional creature and our decisions, biases, hopes and fears are often driven by emotion more than they should be, we often become lost in the lines, when all that is needed is to step back and look at the picture in full; artists probably understand what I mean.

Right now we are in the mandatory Central Bank announcement, "Knee-Jerk" period, but understanding what kind of knee jerk it is (grappling with understanding the issue or positioning using the issue as the catalyst) is the first step.

Yesterday my inclination was toward, "Buy the rumor and sell the news", this isn't immune from the knee-jerk effect as we have seen so many times with the F_E_D.

So I'll be looking at the flows, diffrent markets/assets and presenting a composite that we can work from to take advantage of the knee-jerk effect.

I also want to touch on the issues as I did yesterday to give you a basic grasp of the fundamentals, EU actions are plagued by unintended consequences.

We'll know where the opportunities are shortly, I suspect many are opening up as I write.

Try to withhold emotional judgement for the moment, don't get lost in the micro or the lines, step back and look, the opportunities will materialize and I believe they will materialize today, perhaps soon as the signs are already there (hint-compare the EUR/USD reaction to Draghi vs the market reaction, you are seeing two very different opinions)