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Pillow Talk


Even a broken clock is right twice a day!


"Funny enough, I was just talking to my friend about that. Our speedometer has melted and as a result it's very hard to see with any degree of accuracy exactly how fast we were going."

Del Griffith, Planes, Trains & Automobiles

Good morning and welcome back to the turnaround shack. Monday extended the gains of last week as the bountiful bovine continued their streak. The five day stray spurred the Dow to levels last seen on that fateful day in 2001, invoking nostalgia, optimism and, in many cases, frustration. We've discussed the confluence of potential catalysts--relaxed risk parameters to start the new year, technical affirmation (above S&P 1275), negative gamma (as a function of the short calls sold for "free" income) and a widespread belief that invitations to the FOMC's after-party will soon be in the mail.

If we're to invoke our lessons learned through the years, there are several observations to note. First, and perhaps most (too?) obvious is that Turnaround Tuesday tends to exist in the midst of a one way fray. Perhaps that's a nonsensical notion but I've seen it all too often over the years to discount its existence. It also "fits" with Alcoa's earning salvo which, after leaving a lot to be desired, will emerge as a likely culprit in the after-the-fact blame game.

Be that as it may--and it may be a convenient excuse--it highlights another lesson that bears repeating as we sharpen our #2's and ready for the earnings avalanche. While we know that markets move in four primary time horizons--cycles, phases, trends and nuances--the field position of each speaks volumes regarding how news is interpreted and digested. In short, good news (that's not great) is sold in extended tapes while bad news (that's not horrible) is gobbled up in oversold tapes. Our current juncture is far from nose bleed "close your eyes and fade 'em" territory but, given the jiggy lift we've seen thus far, the fundamental bar has likely been raised with regard to collective expectations.

For my part, I rotated a bit of risk yesterday as I added a chunk of SunMicro (to an existing call position) and pared some pharma and metal holdings. I continue to feel that those latter matters will outperform in 2006 but I'm comfortable manicuring my risk after the recent run. And while I see the acne in the brokers (above XBD 200), I've still got a spate of spring puts on in some money center banks. The BKX has yet to break out (above 106), which is somewhat surprising and a potential bear flag.

In housekeeping news, we're one week away from the launch of our new digs and the critters are working around the clock to ensure a smooth transition. In addition to cutting edge technology, a user-friendly format and an entirely new look, we've always known that the grist of the 'Ville is 'substance over style.' In that vein, I'll offer that we've got a spate of new professors ready to roll and remain uber-committed to rounding out the content proposition to ensure Minyans have everything they need to make better and more informed decisions. It's a marathon, not a sprint, and we've got alotta fresh legs in the city of critters.

Good luck today.

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position in sunw, metals, pharma, financials
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