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Is it Safe?


Even a broken clock is right twice a day.


We can dance if we want to
We can leave your friends behind
'Cause your friends don't dance and if they don't dance
Well they're no friends of mine

(Men Without Hats)

Good morning and welcome back to ducks that quack. Last month was no fun for Hoofy & Co. as they coughed up some coin and puked up some dough. But just as young Boo started counting his chips, a rally arrived and his table got flipped. "I got a bit used to having my way," he said of the red that ended each day, "the bulls now believe the upside will stay but have no idea the price they will pay!" Will turnaround Tuesday hit 'em again and lock Hoofy in a Red Dye bear den? Or can he sustain a two-day affair and spank the backside of the uppity bear? We'll know soon enough as we shake off the jitters and roll up our sleeves in the city of critters!

If we had a bovine wish list yesterday, most of the items would have been checked off. Breadth was snazzy from the word "go" and didn't blink during the downside probes. Participation was broad as the brokers (dry Friday, spry Monday), banks (back above BKX 100), semis (reverse dandruff?), beta (nets and nuts) and small caps all played their part. And despite the sharp Snapper in crude, macro influences (dollar) were quiet enough to allow equities to take center stage.

The late day jig planted a seed of hope for the Matador Crowd that continues to sow as we speak. The bulls haven't had a whole lot to get excited about this year as every try has been snuffed by supply. Still, while inflows have been anemic, volatility levels (-6% yesterday) are flashing red and we're now ticklin' the underbelly of the January downtrends (S&P and NDX), hope springs eternal that this rally will stick. It could happen--merger mania is running wild--but I'm gonna keep both hands on the wheel as I shift into Tuesday.

Earnings season is always tough for the A.D.D crowd but we've navigated it thus far by watching our tells and remaining adaptive. And while my bearish big picture bent remains in the back of my crowded keppe, I've shortened my horizon and "listened" to what the Minx has to say. My sense is that a fair chunk of yesterday's action (equities, metals) was an "Iraqi unwind" and the onus is on the bulls to build on that base. To do that, they'll need continued leadership (financials/semis), staunch internals and accommodative macro variables.

Beeks will swing by at 10:00 to release construction spending (exp. .5%) and ISM manufacturing (exp.57, prices paid 71.5) so keep that on your radar this morning. And please remember that as we chew through the session and digest the action, our fearless Fed will once again sit for a rate debate. While they won't announce their 25 bip hike until tomorrow, we must respect the collective psychology regarding a tighter bias. The FOMC minutes serendipitously sparked the sell-off last month and it remains to be seen if it'll be deja Boo all over again.

Good luck today.


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