Market Poker: Hold 'Em or Fold 'Em?

But baby, baby, there's fever in the funk house now. This low down bitchin' got my poor feet a itchin', You know you know the deuce is still wild.

Baby, I can't stay, you got to roll me And call me the tumblin' dice.

-- Jagger/Richards

Last week the bulls got everything they could have hoped for and more -- but little to show for it: Bush was dealt a royal flush in the Security Council, the Democrats threw snake eyes in the elections, and Alan, the pit boss, comped the heavy hitters and the high rollers. So where was the beef?

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It kind of reminds me of Charles Grodin's great line from the movie The Heartbreak Kid. As the plot goes, while on his honeymoon in Miami, Grodin falls in love with a college student, Cybill Shepherd. He arranges a meeting with Cybill's father to "deal his cards." But when Grodin attempts to explain how he wants to marry the daughter, he's got this "slight problem" -- words fail him. Cybill's father quips, "Is that what you call dealing your cards?" To which Grodin replies: "I'm still sort of just shuffling."

If the market is going to make a go of it, it's still shuffling around. But the market usually has something for everyone. The bears will say the response to last week's "good news" is not a good omen. The bulls will suggest that there was simply selling on the news. You can play this game any way you want.

Some technicians will point out that the high 10-day call/put ratios have been bearish. However, in my experience in looking at puts and calls, I find it more valuable looking at equity-only ratios rather than including the index numbers as well. This is because there are so many strategies involving the indices and so many hedges that many times it's hard to distill any conclusion from the index put/call numbers. Moreover, many times a high call-to-put ratio will be coincident with continued rally phases for at least a while.

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Jeff Cooper is the creator of the Hit and Run Methodology and the author of the best-selling books Hit and Run Trading (The Short-Term Stock Traders' Bible), Hit and Run II (Capturing Explosive Short-Term Moves in Stocks), as well as a video course, Jeff Cooper on Dominating the Day Trading Market. He also created the Hit and Run Nightly Reports and co-founded a trading markets Internet site. Click here for information about Cooper's email newsletter, The Trading Reports. At time of publication, Cooper held no positions in any of the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Cooper cannot provide investment advice or recommendations, he welcomes your feedback. If you are interested in information regarding the Money-Flow Timing Model, please visit www.mutualmoneyflow.com

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