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I'm a Short Trader and I'm Trapped!

Oh god, I'm trapped! I went heavy on the euro-skepticism this morning because so many traders seemed eager to sell or short into the open, assuming that the markets would head down later in the day.

As of 2pm ET, not only had we not dipped, we were at the market highs of the day. There are a lot of traders trapped in short positions who might have to cover quickly.

Of course, all we need is a big negative headline out of Europe right after 3, and the shorts will be saved. But if this continues, a lot of them will have covered by then.

CBOE Volatility Index (VIX) decisively at 25, decisively below its recent trading range of 35-48. "Fear diminishing dramatically as the solutions are finally becoming evident to euro problems. More risk can be put on. Volatility reverts to mean. VIX mean over time is 20. We should be headed back there," one trader frantically telegraphed me.

Not that the euro-skeptics have gone away. They point to the 10-year Italian debt yield — at 5.9 percent is just barely below the recent highs, indicating the markets are not at all convinced that there is a clear path to funding Italian debt yet.

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