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Toe Cheese


Fear the turtle!


Ballerina, you must have seen her
Dancing in the sand
And now she's in me, always with me
Tiny dancer in my hand

(Elton John)

Good morning and welcome back to the tip toe shack. With last week's quick dip fresh in our mind, the bears find themselves in a bit of a bind. They had their best shot to crack the uptrend but push came to shove and the break didn't bend. "We said for a month that we needed a rest," said Hoofy the bull of Boo's feeble test, "the ursine are busy beating their chest but they'll soon be let down, overwhelmed and depressed!" Will Christmas be green for the Matador scene or can the bears shock the lopsided lean? A new week is here so you better get jacked as we ready again for the critter attack!

Textbook technical analysis dictates that a breakout (breakdown) through resistance (support), followed by a consolidation, is unequivocally bullish (bearish). In a perfect trading world, the sideways slither allows the bulls to digest their recent meal and the bears to recalibrate their furry coordinates. Chart work is but one of four primary metrics (and thus prone to fail when viewed in isolation) but to ignore the patterns would be myopic at best and stubborn at least.

As we skate across thy golden pond and eye baby new year, the onus is on us to monitor the ice capades. The frozen (low hanging) fruit seems ripe for the pickin'--performance anxiety is about to get loud, we've sufficiently worked off the nose-bleed overbought equity condition and the macro landscape (crude/metals/dollar) has been better behaved--but there is no such thing as risk-free money. Therein lies the caveat for the blind believer camp--when a set-up seems too good to be true, many times it typically is (particularly when complacency and a collective expectation are uniform).

We could enter into a diatribe as to why the big picture is misunderstood by mainstream media. For one, it's du rigueur to discuss risk when "onward and upward" sells newspapers and attracts viewers. And while we could mention how incessant liquidity is masking margin contraction (and a lack of pricing power), that discourse is lost in a larger sea of immediate gratification and the next best thing. Indeed, with M&A heating up (Sprint (FON:NYSE)/Nextel (NXTL:NASD) and Johnny John (JNJ:NYSE)/Guidant (GDT:NYSE)) and buybacks all the rage (nice eyes Horse!), the structural debate is now hotly contested on both sides of the aisle.

With the recent backhand to metals and crude, I would again like to remind ye faithful of the importance of time horizon. One year ago, I humbly opined that energy and metals would be the tech and financials of yesteryear. It wasn't advice as much as an observation but it paid off handsomely for those who arrived at a similar stance. And with the fourth quarter emerging as a "mean-reverting" period, I will once again share that I believe the aforementioned dynamic is secular and--after this shake-out runs its course--will manifest for years to come.

Back to life, back in reality, this week will be chock full of freak as Elmer arrives tomorrow (hiking boots in tow) and a slew of companies will share their state of the union. The financials are of particular importance as both Lehman Brothers (LEH:NYSE) and Goldman Sachs (GS:NYSE) take center stage. This group has been dry and spry (as traders "build in" increased M&A activity) but they've also had a helluva run. Look for Duke & Duke to set the tone this week as investors weigh the specter of higher rates (and a flattening yield curve) vs. expectations that Randolph and Mortimer will turn those machines back on!

We power up this Monday pup to find firm overseas bourses, an oversold pop in the metals, slight giveback in the greenback and marginally higher S&P futes. We also find that Minyan Neal Greenberg remains atop the 2nd Annual Minyanville Festivus auction. The lucky duck, as of the close next Tuesday, will join myself, John Succo, Scott Reamer, Tony Dwyer, Greg Collins, Jeff Macke, Rich Gula, Phil Erlanger, Michael Santoli, Greg Weldon, Bernie Schaeffer, Fokker and a few special guest "shooters" for a intimate holiday gathering. Proceeds, as always, will benefit The Ruby Peck Foundation for Children's Education and I promise that a slew of surprises will await the winner!

Good luck today.


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