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The Young and the Restless


Lunar eclipse, Red Sox I hear a 100-point hat trick?


Because I'm still in love with you
I want to see you dance again
Because I'm still in love with you
On this harvest moon.

(Neil Young)

Good morning and welcome back to the spawning. The bovine are here and they're banging the drum while the once noble bears are seemingly numb. The rally was fierce and the ursine got screwed as the market caught wind of the spillage in crude. "With five days to go are you really that shocked?" said Boo to his crew of the frenzy unlocked, "I answered the door when I heard a loud knock and the next thing I knew my whole world was rocked!" Can the bears make a stand and suppress the demand or will Hoofy step up and secure his command? We'll know soon enough as we ready to thrill and toss our two cents in the heat of the 'Ville.

Two short days ago, you couldn't buy a smile in Matador City. Technical trips had become a bad habit, energy prices were eye-poppin', fundamental outlooks were muted and the electoral uncertainty ruled the roost. It was starting to get a bit spooky for the bulls who have sucked on the short end of the '04 performance stick. But just as the Minx appeared forlorn, an evolving bid emerged for equities. It started with stealth traction in the banks on Monday, led to a pronounced "S's over N's" tape on Tuesday and exploded higher Wednesday as the brokers ripped, crude dipped and hedgies unwound their existing positions (short equities, long oil, long fixed income).

We now arrive at the mirror image of Monday's scrimmage. The technicals have markedly improved the 200-day tetherball and it's the bulls who are feeling particularly emboldened. Hoofy mapped out his perfect storm yesterday and he's hoping the "train has left the station" mentality manifests through mutual fund marks, the election and, of course, year end performance anxiety. Could it happen? If the election goes off without a hitch and there are no geopolitical glitches--two elements that are far from certain--the bulls will certainly try to run 'em into January. You may not agree with the logic but we must respect that it's part of the probability spectrum.

As many of you already know, I've choked up on my trading bat and looking to hit for average rather than power. In this environment, where each day seemingly blows in a new crosscurrent, I wanna be nimble and quick. I've been trading around some core puts (sleeping pills) and renting inventory when the Matador horn blows. Case in point was yesterday's Duke & Duke inspired rally--I sensed acne above XBD 130 and proactively participated in the move. At the end of the day, while keeping my "situational" exposure, I punted most of my trading risk and went home with a clear head.

We power up this Thursday pup to find a jiggy Asia, firm Europe and slippy metals (big downside reversal yesterday). With China hiking rates (must be nice), a new element of concern will ebb into the collective mindset. As always, however, the reaction to the news is more important than the news itself so we'll have to see how the tape digests it. The mainstay tells remain in place (financials, crude, breadth, semis, cyclicals, levels) and it's almost time to start the race. Think positive and carry a big stick--we're almost at the weekend.

Good luck today.


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