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The Follicle Follies


Everyone kept shorting the Panthers too!


Good morning and welcome back to the fawning. With the glowing showing of the bovine flowing, the giddy bull camp just keeps on growing. It's hard to blame them for feeling so strong when Hoofy's heroes can do no wrong. Good news, bad news, it's all the same as the upside assault keeps fanning the flame. Is eight weeks enough to snuff out the fluff and allow young Boo to pull an ace from his cuff? Or will Hoofy just keep on calling his bluff and twist our bear while it's cold (in the buff)? It's a spankin' new week for the minxy technique so settle in team and let's all take a peek!

The news has already started to hit the wires and analysts everywhere are plowin' through their number two's. Earnings, which started in earnest last week, will again be the dominating factor in the ever changing landscape. While the Minx will be lookin' for her ninth consecutive flex, Boo hasta be wondering what it's gonna take to find an acorn. Indeed, the most fervent bears have towel tossed and you really can't blame 'em. If this was a ball game, they'd already have shuffled up the squads.

The balance--if you can call it that--is relatively straightforward. Hoofy is riding a liquidity high and, in the process, sucking in the "I can't believe I didn't see this coming and it's not too late to get on board" crowd. The bovine mantra is not without merit--the banks have broken out to all-time highs, the semis, biotechs and brokers have compelling charts, corporate spreads remain tight and the price action is nothing short of fantastic. And while certain parabolic charts are reminiscent of yesteryear, we know from experience that emotion will exacerbate the prevailing trend. That's why the panic portion of our minxy trifecta (denial/migration/panic) is always the most pervasive.

The offset--and eventual demise--is the backdrop that has been evolving during this prolonged run. Scotto did a fine job of canvassing the concerns and while nobody seems to care, you should ignore them at your own risk. The underlying theme emboldening the bulls is that we've yet to reach the extremes that were "attained" during the bubble gum fun. Therein lies an inherently flawed reasoning. Using those outliers as a basis of comparison has, by definition, a statistically low probability of success.

With that said, a fine line exists between "never letting an opinion get in the way of making money" and "trading in a manner consistent with your thought process." That is a path distinct to each of us and my goal is to adapt and adhere (to discipline) as we edge through the process. At times, that means covering up to get out of the way. Other times it'll dictate renting longs and making hay while the sun shines. Still other times, it means building exposure as a function of price and unleashing the hounds. Knowing which style to employ (at what juncture) is half the battle.

I respect Hoofy's argument and, truth be told, the intra-market rotation is the healthiest of all digestions. A possibility remains that we're in the throws of a legitimate blow-off and it's got some room before Boo lowers the boom. Regardless, most seem resigned to the fact that they'll see trouble before it brews and will have ample time to trade accordingly. Perhaps that'll prove true but if the last few years have taught us anything, it's that the market doesn't have to answer to anyone. We are, by all accounts, pawns in her minxy game.

S&P 1150-1160 (a 50% retracement of the entire bear swoon) is a zone on many radars and how we get there will play an important role. The internals have been a consistent positive and that, coupled with leadership, will be my keys. We power up this morning to find gold (higher) and the dollar (lower) bouncing off their respective trendlines, Europe marginally in the green and conference calls competing for attention. If I had to venture a guess, it would be that we see the highs in the early portion of the week.

Good luck today.

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