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Wonder Away!

By

I had Boo on the ropes yesterday and couldn't knock him out.

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And you know it makes me wonder
What's going on under the ground
Do you know? Don't you wonder?
What's going on down under you

(Crosby, Stills, Nash & Young)


Good morning and welcome back to the ducks that quack. Earnings are here and they're coming out quick as traders get set for the conference call shtick. The landscape is ripe for some fresh information to shake up the mix and diffuse the frustration. "The start of '05 has been a tough nut," said Hoofy the bull of the check to his gut, "I know that I've been in a bit of a rut but it's a long year and I plan to kick butt!" Will the coming reports squeeze the newbie bear shorts and allow the bovine a redemption of sorts? We'll know soon enough as we shake off the jitters and get set to jet through the city of critters!

The obvious focus on the Street is the imminent avalanche of corporate reports. After a less-than-stellar '05 start, the Matador Crowd is betting on fundamentals to spur the herd and begin the tricky and tardy rally. We know from experience that different metrics "matter" at various junctures and while the looming headlines may indeed dominate trading, my sense is that, with the macro asset dance competing for monolithic merchandise, psychology--and the reaction to the numbers--will assume a more important role.

My internal radar has been at odds of late as a function of a few variables. A dollar devaluation and equity deflation have always been cornerstones of my bearish bent and while I sensed the bounce in the greenback--and saw the fragile footing in equities--the wishbone reaction handcuffed me. Further, and this is likely the case in many bear caves, the intangibles haven't been quantifiable in quite some time. Geopolitics are an afterthought (Iraqi election violence?) and pervasive complacency is all but accepted.

When my mindset is in transition, I like to choke up on the bat and tighten my risk profile. There are many ways to skin a profit if we can stay attuned with our time horizon. If you were to ask me where we will be in five years, I would look you in the eye and offer that stocks and the dollar will be lower while energy and metals will be in the throws of a secular bull market. The trick isn't about getting from A to C, however, its about all the little "b's" in the middle. That is why it's so very important to know where you wanna go before jumping on a train.

Alcoa (AA:NYSE), Genentech (DNA:NYSE) and party crasher Advanced Micro (AMD:NYSE) got this party started last night and folks aren't thrilled with the numbers. Again, while these surely help shape sentiment, placing too much dependence on individual reports may distract you from the total trading mix. Truth be told, with 8000 hedge funds watching the same screen, the hot potato tends to mash the edges. I plan to weigh the aggregate earnings and measure them against relative expectations. A disconnect (vs. perception) could sway the reactive players and provide an advantageous risk/reward.

We power up this Tuesday pup to find Europe lower (STMicroelectronics (STM:NYSE) isn't helping), the tricky Nikkei holding recent acne, the metals bouncing a bit and the dollar giving some greenback (still above the 50-day). After a brief pop & drop that cleared out the buy stops (above S&P 1193), we find ourselves back in the recent range above S&P 1183 (50-day). The NDX has a more troublesome chart as the recent "churn" under the 50-day is barely holding on to double secret support (NDX 1560). And finally, with the banks waving the red flag all day yesterday, BKX 102 remains a focus as we roll up our sleeves and dig in our heels.

Good luck today.

R.P.
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