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Rock, paper, scissors


You all know me by now - if there really isn't much to say, I don't try to press it and make things up. There is very little market moving news on the economic and research front this morning and as a result, futures are a little softer due to geo-political concerns and training from yesterday.

Yesterday opened strong and throughout the day stocks weakened as they lacked any catalyst in an illiquid environment to drive them even higher. When so many people aren't around to participate in the market, it only takes a marginal amount of demand to drive stocks up and the same holds true for supply. The buyers drove stocks up in the early going and when no one else showed up to play those traders sold and the markets weakened and closed down by a small margin.

The geo-political front has continued to deteriorate and it isn't even related to Iraq. This is a newer piece of the puzzle since the market entered the twilight zone in the beginning of December. The newest development from North Korea is that they have expelled two nuclear inspectors. This does not set up well given the continuing War on Terror, pending action in Iraq and Venezuela oil strike. Forget that first sentence - there is a lot going on!

In a market where soooo many managers have called it a year, introducing new potentially negative influences certainly hampers any enthusiasm to buy, especially after what happened to anyone who was a buyer yesterday.

The markets remain in an oversold state and seem to be turning. In yesterday's commentary, I suggested that there was two ways to work off an oversold condition. The first was through rapid price appreciation and the second was through sideways action over time. I continue to believe that option number one is possible, but it better begin pretty soon because given recent economic stats and the unlikelihood for great news in Q4 earnings (to be released beginning 3rd week of Jan).

Frankly, given the geo-political backdrop, I am rather stunned that the market isn't down quite a bit more than it has been over recent sessions. It basically means to me that most market participants have called it a year and are basically in the positions (short OR long) they want to carry into 2003. That said, they would also react to news that develops when it exaggerates price movement - just in a smaller way.

As a result, despite the apparently quiet action, we must always stand ready troops. ATTENTION!
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