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Who's Afraid of the Big Bad Event?

Until the Fed is happy or out of the way, look for the market's ebb-and-flow pattern.
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Do you see the ebb and flow? Greenspan's going to speak. Lots of puts get slapped on. Many shorts get added. People sell calls on various indices. These bets get put on because we are on heightened Fed alert. Then Greenspan says nothing. The calls get bought back, the puts blown out and the shorts covered. The market rallies off the short getting taken off.

This short-cover pattern is something that occurs when the BBE is out there, the Big Bad Event. In this case it would be a signal of a preemptive move because things are so out of control. When it turns out that we don't get the BBE, everything feels great until the next moment when the BBE could occur. A lot of this put buying is done by hedge funds trying to "get set up" for the BBE. When it doesn't happen, they take the set-up off until the next time.

I suspect we will see the same BBE fears tomorrow afternoon ahead of the employment numbers. I will be watching for put buys and short-selling. If the number is weak on Friday, the set-up will be taken off and the market will rally. If the number is strong, these hedge fund put buyers will probably press their bet, hoping for an intra-meeting Fed tightening. If they don't get it, they will cover again.

Get used to this pattern. It will be with us until the Fed is happy or out of the way.

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James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

jjcletters@thestreet.com.