Investors Showing Their Id

So one little employment report from ADP, which has not exactly shown any sign of accuracy, turns this morning's bold buyers into shrinking violets. Sure the major indices might open a little higher, but given yesterday's reversal, the fact that oil prices seem contained around $140 a barrel, you'd expect a little more strength coming into the opening.

But I guess we are in situation in which the id of fear is overwhelming the bravado of ego. So all that cash will remain on the sidelines. But if history has shown anything, it is that you can't wait for an all-clear signal, or you will miss the first 5%-10% of a move.

This is the first time I don't have any Spyder Trust (SPY - commentary - Cramer's Take) put protection inventory. I'm actually thinking if the S&P 500 dips below 1280 today, I'll be looking at buying some cheap calls on the notion that there will be a snapback rally some time in the next week.

One sign that a lot of bad news is being built in is that even as United Health (UNH - commentary - Cramer's Take) slashed their earnings forecast, the stock is indicated to open about $1.60, or 5%, higher at $27.40 a share. That tells me investors are starting, however slowly, to move some money out of the mattress and into beaten-down stocks.

I know I talk about the VIX quite a bit because it comes with the territory of covering options, but I basically don't give too much weight on a day-to-day basis. But I will be watching it today. If it can drop below 21, that would leave a decent spike and lead me to believe that investors are going to show a more bullish ego in their actions.

But for now, the id is the thing, and that is dominated by scared and needy behavior.

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Steven Smith writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He was a seatholding member of the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE) from May 1989 to August 1995. During that six-year period, he traded multiple markets for his own personal account and acted as an executing broker for third-party accounts. He appreciates your feedback; click here to send him an email.

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