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Sun of a Gun!


Mr. Popularity!


Little darling, it's been a long cold lonely winter
Little darling, it feels like years since it's been here
Here comes the sun, here comes the sun
And I say it's all right

(The Beatles)

Good morning and welcome back to the sneak attack. With January slowly dripping away, the bovine will try to rally today. That posture is cute on a number of fronts but every good flick has a fair share of stunts. "The 200-day will hold the first try," said Hoofy the bull of the four-letter fry, "I'll look to absorb the early supply and set some tight stops below each new buy." Can the bulls put an end to this most recent trend or will Boo's motley crew finally break what they've bent? It's tricky--it's Tuesday--it might turnaround so dig in those cleats as the Minx takes the mound!

It's been a fugly fray for the Matador Crowd as lopsided optimism, macro unwind and structural shifts have combined for a prickly perfect storm. If the dip shtick was the style that smiled the last two years, the fade trade has paid off in spades ever since the '05 grenade. We're now at the point where guts will be checked in a search for respect and the bulls have their backs to the wall. With the NDX 200-day a kitten's whisker away, you can almost sense the urgency seeping out of certain circles.

My main beef with the looming snapper attempt is two-fold. First, angst levels (as measured by the VXO) are basically unchanged since the calendar changed. That's not the stuff of sustainable bounces and actually offers one of the more colorful flags flying in Red Dye. There are clearly some oversold indicators nestled in our midst (stochastics) but they'll be fleeting after some ursine retreating. The other caveat is the rather obvious dandruff that is flaking in the S&P. While the banks are Cliff Branch above BKX 100, the textbook head & shoulders offers ample cause for pause.

There is, of course, a bigger structural situation unfolding as Elmer sheepishly tries to let some steam out of the system. That is likely why the dollar has bounced and proxies such as Brazil, gold and other liquidity dependent vehicles have been hammered. We can assimilate earnings all night long (been there) and respect the geopolitical uncertainties (disconnect?) but global markets are a function of supply and demand. That dynamic can be augmented (legitimate growth vs. debt-induced bravado) but it'll ultimately tell the tale. Please watch DXY 84 for guidance as a greenback rally through that level may smelt gold to the 200-day ($411) and provide equity hints.

Big picture aside, today is shaping up as Hoofy's best shot at some short-term redemption. In a perfect world, we would open lower (not happening) and test the NDX 200-day early before Snapper does what he does best. With the Iraqi elections looming (and vols where they are), my upside tries will be disciplined and defined. Again, the single most important decision you should make before slapping on risk is one of horizon. Is it a trade for today, a trade for a catalyst or a trade for a thesis. And regardless of which label is affixed, NO trade should ever be open-ended or career threatening.

We power up this frisky pup to find Europe sticky green, the dollar firm anew and the metals fluxy. In addition to the oft-mentioned BKX 100 and Dow 10-4 levels, I'll also watch S&P 1175 (first resistance) and keep close tabs on the internals. The trick to effective trading is filtering the noise and maintaining our poise, two propositions that are much easier to preach than to practice. Take a deep breath, respect the process and--whatever you do--never trade "not to lose." Playing with a defensive posture is the quickest way to turn over the ball.

Good luck today.


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