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The Natural Evolution

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This is play-off trading--the regular season got you here but this, my friends, will define our '06 legacy.

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"Red, it took me sixteen years to get here. You play me, and I'll give ya the best I got."
-
Roy Hobbs


Good morning and welcome back to the earnings shack. We've waited in vain for this day to arrive as we ready ourselves for the fundie deep-dive. With the technical, structural and psychological metrics "out there," corporate
is cleaning their cleats and stepping to the plate.

Leading off was Alcoa, which whiffed on the first pitch and was promptly hit for 7%. One inning does not a series make, we know, but the crowd is on the edge of their seats as they await the rest of the line-up. We've spoken, at length, about the power of perspective and the coming weeks will help shape that collective mindset.

Hoofy is courting Goldilocks (no milk for him!) as he looks for the "just right" environment into year-end. He's got the technical metric in his back pocket above S&P 1340 and BKX 114 and wants last licks at those levels when the dust settles. Indeed, as the big picture is made up of a million smaller pictures, that's one snap shot he won't want to lose.

Boo, as recently discussed, is eyeing the broader structural shift. He lost some Street cred when he pounded his paws pointing to the CRB, which broke the five year trendline six weeks ago. The commodities have been heavy ever since--the current churn notwithstanding--and remain on his watch list through an "asset class deflation vs. dollar devaluation" lens.

The big, brown bear has also been eyeing the dollar as a potential strike two. The greenback has a five year trendline of its own--lower, as we know--and is currently poking and prodding to the upside.

He's been fielding a lot of questions from the Minyanship pointing to historical examples of a stronger dollar in concert with a stronger tape and he doesn't dispute that. He's simply saying that, in the post-bubble world, reflation efforts have jacked all asset classes at the expense of the greenback.

If that begins to unwind--and that's a monster if--it will be far from bullish. As he's trying to figure out this tape along with the rest of us, he's trying to give us a heads up that lower commodities and a higher dollar are conditional elements of that dynamic.

We begin today's Hump Day spin with Europe pretty in pink, the dollar and metals flattish and pre-opening futes somewhat softer. That'll all change on a dime, Minyans, so please take a long, hard look at your risk and make sure that it's either defined (trading risk) or that you've got the flexibility and conviction to buy lower and sell higher.

This is play-off trading--the regular season got you here but this, my friends, will define our '06 legacy.

Good luck today.

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