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Made in the Shade

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I can use a broad right about now!

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When I wake up in the morning, love
And the sunlight hurts my eyes
And something without warning, love
Bears heavy on my mind

(Bill Withers)

An early peek at the freak offers a somewhat muted opening with the N's outpacing the S's (as a function of General Electric (GE:NYSE) vs. SOX stickiness). The breadth, interestingly enough, is counterintuitive with the big board flexing a 3:2 positive posture and the Nazz flattish at best. Europe has begun to slip a bit, crude is ripping higher and the dollar is (once again) weaker.

A couple of quick technical blurbs. We've discussed the potential acne that exists (above the yearly highs) and yesterday's pop and drop was a clear example of just how many traders are focusing on the same levels. Brian Reynolds has spoken at length of the S&P 1050 line in the sand. That was previous support in 2002 (broken in June 2002) and yesterday's test was the first viable attempt to jump the hump since. In addition, that's a zone that is the upper band tag of a potential "broadening top" formation. Is this important? Perhaps. A "broadening bottom" was THE pattern that marked the existing bottom (from last year). Hmm....

One thing is certain, bulls and bears alike are conditioned to buy any and every dip. That psychology is clearly a function of the massive liquidity infusion (Elmer) and it's proven to be a very profitable strategy. It will also serve to exacerbate the decline when it arrives as the sell side interest is currently, well, disinterested. That leads to an obvious question: If players are involved because the tape acts so well, how many dips will it take before the collective mindset decides that it no longer does?

History dictates that bubbles are often followed by mini-bubbles and I remain of the opinion that we're chewing through that gum now. When it stops (and pops) remains the zillion dollar question and, as this year clearly shows, there's real money to be made in the interim. Thus far, the ducks and Hoofy are pretty good pals but, if the Burned Razor thesis plays out, we should see a decent trade lower in the not too distant future (followed by a sharp pop higher into year end and some meltage in early '04). That's what I think and while it's clearly not advice for you to act, I want to make sure you know how I feel.

Thus far, the Minx is showing some signs of shruggage (disinterest) in a crimson GE and she's trying to use yesterday's gap fillage as a base with which to build. Please see the "other gaps" that remain below (S&P 1020-1030 and NDX 1360-1340) and put 'em on a post-it note for future reference. I'll bet dollars to doughnuts that those get stuffed like a Red Sox pitching staff before long.

As always, I hope this finds you well.

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