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The Dance Card


A snapper trapper?


You can't start a fire
You can't start a fire without a spark
This gun's for hire
even if we're just dancing in the dark

(Bruce Springsteen)

The afternoon session slowly edges along and the critters have entered into a high stakes game of chicken. The bulls, emboldened by the breadth, trendlines and mergers, are championing for a late day Snapper. The bears, who maintain that too many bellwethers are now tainted, are rubbing their paws together and viewing any strength as a gift. Ay Poppy, It's enough to drive a Fokker to south Florida!

The great debate seems to be centering on the rate of the (widely perceived) upturn. While it's true that sequential growth rates were better than expected, I will offer that the "base" of comparison was pretty depressed. I suppose that this is one argument that will only be settled with the benefit of hindsight but the death knell of the bull camp, if and when, will likely stem from the nonconformity of this "recovery." Think about it--if we're just emerging from the biggest bubble in the history--a time never seen by the financial markets--does it make sense that we'll suddenly re-enter a standard cycle? Remember, Minyans, the greatest trick the devil ever pulled was convincing the world he didn't exist.

The tepid composition of Microsoft (MSFT:NASD) added the Redwood dead wood to a growing list of underwhelming reports. If General Electric (GE:NYSE), 3M (MMM:NYSE), Caterpillar (CAT:NYSE), KLA-Tencor (KLAC:NASD), Merck (MRK:NYSE), JP Morgan (JPM:NYSE), Ebay (EBAY:NASD), Amazon (AMZN:NASD) and IBM (IBM:NYSE) weren't up to snuff, particularly after the jazzy and snazzy rally, it warrants a nose scrunch. It seemed, however, that everyone realized this at the same time and, when that happens, the minx typically likes to confound the consensus.

Hence, the Friday snap and this potential trap. After watching the Nikkei get smushed and the bellwethers withstand the storm, there has been a fair amount of towel tossing by the ursine camp. To be sure, if we continue higher, the script will seem obvious and redundant. We held the trendlines, we didn't Monica on bad know the drill. The potential fly this time around is the perception of non-confirmation from corporate America (as we edge through yet another second half recovery). Further, there's been some rumblings that the liquidity spigot may be reaching into the reserves.

To be sure, the burden of proof is on Boo to prove that this time is different. He'll point out that, for the first time in a long time, stocks with bad news were taken out back and shot. Not just small names, either--big cap, widely-owned issues in leadership sectors. If they can gap these names lower, he offers, there's no reason that the market can't do the same (see the Nikkei). Chicken Little Boo? Perhaps, but the bear makes a point.

Either way, it's not necessarily a thought for today. As we discussed Friday, the potential for a bounce existed and it's now become reality. THE question, my friends, is whether last week's pullback was countertrend or if, by chance, the rallies have now become the countertrend. Hoofy (and Aaron) will correctly argue that as long as we hold the trendlines, the former rings true. Still, the market is a constant and dynamic assimilation and it never hurts to have the discussion.

That's about it from the wilds of Minyanville as Fokker and I chew through another session. I would like to take a moment and send a huge Minyan shout out to my close friend Tommy Carden. At the start of my career, when I was lean and green, Tommy took me under his wing and showed me the ropes. I'll never forget that, brother, and I want you to know that you've got a pal for life. After all, us bartenders gotta stick together!

As always, I hope this finds you well.

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