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The Hump Day Cometh!


Bring the noise!


And if you don't love me now
You will never love me again
I can still hear you saying
You would never break the chain.

(Fleetwood Mac)

Good morning and welcome back to the forming. Today has been circled for more than a week as we all settle in to hear Elmer speak. With tensions quite high and the Minx poised to move, traders are betting we'll soon find a groove. "Let's get this bogie out of the way," said Hoofy the bull as he readies to play, "as soon as we hear what the boss has to say, the stage will be set for a bovine buffet!" Will the bulls flip the switch and crush a fat pitch or can Boo and his crew push us into a ditch? We'll know soon enough and the critters are pumped as we ready anew for a sprint up the hump!

We've spent a fair amount of time digesting the four primary metrics that dictate the collective price action. We heard from corporate America and fundies seem to be fine (up 20% year over year will satiate the reactive rationalization). The technicals, as they're apt to do, have improved nicely as a function of higher prices and pierced resistance. Psychology is--and has been--steadfastly constructive for the better part of the past few years. All that's left to determine, quite simply, is whether the structural underpinnings that have buoyed the financial markets will remain in play.

My take on the current dynamic may be overly simplistic but it's the view as seen from these old eyes. Either we splash and splurge (at the expense of our currency) or the pied piper will start to pay dearly. The good doctor tried to wean us off the I.V. drip in January but quickly administered a transfusion when our financial pulse started to weaken. The artificial heart remains determined, however, and trying to pen an equity epitaph has been a costly endeavor for the frustrated bears.

The irony, at least from where I sit, is that the patient seems to be losing patience. The "easy money" has been made and double digit returns are an exception rather than the rule. I'm not referring to the overcapacity in the financial industry, although that largess manifests daily, but rather to the consumer in general. As we slowly chew through the disposable income created by the bubble and debt digs a deeper hole, there seems to be a collective frustration that everyone feels but few speak of. Anticipating the intangible "uncle," in many ways, will dictate how we perform when he finally arrives.

With that said, there's precious little edge in preparing for a surprise party that nobody will receive an invitation to. Today's testimony will offer clues, however, and we'll do our best to fit the pieces in the puzzle. With expiration looming on Friday, we must appreciate the potential for an outsized reaction to the macro class asset dance. We know the players--the dollar, metals, equities and bonds--and will diligently monitor the subsequent sector rotation. And, as always, the near-term tea leaves (breadth, financials, beta, levels) may help leave a profitable taste in our mouth.

We power up today's pup to find a recessionary Nikkei (-40 bips), sluggish bourses, flattish greenbacks and slippage in the metals. The Elmerthon will begin in earnest at 10 am EST and should set the tone for the rest of the week. At the risk of being redundant (at the risk of being redundant), I will remind ye faithful that time horizon remains the single biggest decision in our midst. There will be a ton of noise and a very crowded huddle today--a proactive and lucid strategy will serve us all in good stead.

Good luck today.
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