The VIX is once again plumbing ten-year lows, providing a graphic picture of year-end inertia that rivals a lug nut in its undecipherable muteness. In only two instances during the last decade, in 1999 and 2003, did the early days of the New Year find investors and traders the least bit excitable. Will 2006 begin with a bang or an implosion? As always, the answer is: maybe. Many top-flight technicians, including Steve Hochberg of Elliott Wave International, have described an accretion of topping signs that has grown more menacing with each passing week. For Hochberg, the advent of a significant bear cycle is imminent, the only uncertainty being whether the Dow Industrial have already peaked, or whether, before they can tank, they must make a marginal new high above 11000.

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Assuming the top is already in, effecting in Elliott Wave terms a rare, truncated fifth wave, the fact that the put-call ratio recently hit a five-year low at .40 suggests that few investors are leveraged for the plunge. But if put options are heavily out of favor, as it would appear, blame the fact that no one has made any money on them in nearly twenty years. I exaggerate, of course, but only slightly. Many Rick’s Picks subscribers have written recently to ask whether it is time to jump on some puts. Here’s just such a query, received a few days ago: “I have the real feeling -- that's why it probably will not happen -- that this market could really collapse just after the holidays. Possibly even sooner, which would be a big shock. So, what are best most cost-effective put options to buy that would provide the biggest bang for the buck? You would know!”

Would that I did know! I know only what you know – that stocks have continued to defy gravity for far longer than many of us could have imagined. This suggests that betting that “something” will happen with the arrival of 2006 is not an odds-on shot. We’ll continue as usual to lay in a modest inventory of puts in selected vehicles, anticipating the sort of correction that could clear the air. But we do so without any illusions of making a killing.