By Todd Harrison Nov 08, 2004 8:52 am
N's over S's!
"Come to Los Angeles! The sun shines bright, the beaches are wide and inviting, and the orange groves stretch as far as the eye can see. There are jobs aplenty, and land is cheap. Every working man can have his own house, and inside every house, a happy, all-American family. You can have all this, and who knows... you could even be discovered, become a movie star... or at least see one. Life is good in Los Angeles... it's paradise on Earth."
-Sid Hudgens, LA Confidential
Good morning and welcome back to the bovine snack. A loud ursine shriek could be heard this past week as the bulls put together a scary win streak. It started before the election hardcore but found more demand when we saw jobs galore. "This rally jammed me in places unseen," said Boo to his crew while adjusting his spleen, "I'd tell you more but it's somewhat obscene and the 'Ville is a hill that we like to keep clean." Can the bear repair his state of despair or should he grab floor, close his eyes and say prayers? We'll know soon enough as we shake off the dust and prepare this affair with new Minyan thrust!
Once upon a time, nine sessions and 70 handles ago, the Matador Crowd was biting their nails. With technical levels broken, uncertainty mounting and crude driving the speed limit, a breakdown seemed like the inevitable path of maximum frustration. We mapped out a scenario--and admittedly assigned a lower than likely probability of it occurring--that called for a leap of faith into a potential confluence of bullish evolvements. Sure enough, in two short weeks and in the face of countless follicles of precious hair, the bulls have climbed through the looking glass and have taken their pals by the horns.
The up, up and away seemed a bit too obvious to these eyes but proved once again that perception dictates reality. Outside of the obvious overbought condition--which shouldn't be discounted--the action has sprouted acne in most of our hallmark sector tells. The brokers, banks, small caps, cyclicals, trannies and midcaps have all broken out and the all-important S&P is thisclose to giving the mother of all signals. Factor in the rampant performance anxiety (long squeeze) and the continued wink from corporate bond land (who's better than The Horse?) and voila!--you have a path of least resistance that would make Kris Kringle blush.
As many of my esteemed colleagues pointed out on Friday's Buzz, we've seen these types of obvious breakouts (breakdowns) before, only to see the bulls (bears) trapped in a false sense of security. And while the '04 downtrends have been broken in the Industrials and the NDX, all three sisters are now tickling areas of congestion that have proven problematic in the past. That, combined with the extended nature of many mainstay sectors, could very well lead to a pause that either refreshes or is just plain fresh.
The big picture backdrop remains equally minxy as the dollar is abyssful and gold trades at a 16-year high. Indeed, a pure macro assimilation has the feel of an asset class rotation that has yet to impact the equity leg. It hasn't mattered yet, mind you, but as we race towards the '04 finish line, we may want to check our rear-view mirror for flashing lights and sirens. Chambo (on tap tomorrow) and Elmer (Wednesday) may play good cop/bad cop this week as traders operate with an attitude that is above the law. And, of course, the Asian holders of our debt will be the ultimate judge in deciding the fate of the Minxy masses.
We power up this Monday pup to find Europe and Asia mixed, the metals giving a wee bit back and the dollar trying to hold DXY 84. Most of the weekend rags read "all systems go" and that'll either prove omniscient (as it has) or as a speed trap. I'm edging back into the muck with an open-mind and a tight pad, looking for advantageous risk/reward and exercising my right to be patient. The voracity of the latest lift surprised me but rather than look back, my eyes are fixed forward and looking for our next best trade.
Good luck today.
No positions in stocks mentioned.
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