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Keep the Change!

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Lets get carvin'!

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Ch-ch-ch-ch-Changes
Turn and face the strain
Ch-ch-Changes
Don't want to be a richer man


(David Bowie)


A wise man once said that the more things change, the more they stay the same. I don't know if it was the same sage who offered that what goes around comes around, but the circles certainly overlap. An undeniable sense of deja vu is gripping Wall Street these days as traders discount the likelihood of a year-end rally. If we see some repeat performance anxiety, it'll be sweet redemption for those who took the leap of faith. If the path of maximum frustration leads through Red Dye, it'll serve as a painful reminder that hope isn't a viable investment vehicle.

Hoofy will argue that an accomodative policy and the collective psychology has combined to create powerful upside momentum. Selling pressure has been unmotivated at best and absent at worst, producing a path of least resistance that belies the benchmark. With an electoral rally that has irradicated technical resistance levels, an optimistic eye would offer that the averages are consolidating in an orderly and refreshing manner. Give them a week, he'll offer, and they'll take out your knees.

The bears are grasping at macro-oriented straws and heaving them after a camel that has already bolted from the gate. There is a fine line between riding the tide and using price to your advantage, however, and sentiment is ripe for a back-handed smack. The question facing portfolio managers is one of degree and acceptance. Many have carved out marginal gains and their decision whether to press the bet or lock in their year will shape the tape into the holiday season.

The recent action has produced a stealth technical pattern that may offer clues in the muck. Since October 28th, both the S&P and NDX have held a steady uptrend of "higher lows." The action of the last few sessions has provided a fresh spate of "lower highs." Voila! We now have a near-term pennant formation and a breach (either way) will likely impact the near-term price action. Toss in a relatively tight band for the piggies (BKX 100-BKX 101.80) and we're able to walk our journey one step at a time.

Peripheral influences include the dollar, which has broken to fresh nine-year lows this morning. The attendant action in the fixed income market bears watching as softness will usher in fresh speculation that foreigners are dumping our debt. It's an admitted extrapolation but perception is reality, particularly against a backdrop of reactive rationalization. Breadth and crude also remain on the radar, as does the action in the nets (note the Google (GOOG:NASD) gap).

With traders casting a watery mouth towards Thanksgiving, the ranks will surely thin as our waists do anything but. That introduces the specter of low volume and, henceforth, higher volatility. This is the time of year to appreciate our good fortune and focus our energy on family and friends. Be smart about how you position your risk and remember that discipline is a part of any balanced financial diet. And please remember, bulls and bears make money and turkeys get slaughtered!

Good luck today.


R.P.
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