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Of Mice and Men


May peace be with you!


How do you shoot the devil in the back? What if you miss?
--Verbal Kint, The Usual Suspects

Good morning and welcome back to the twisting fix. After four sessions of tense turns, we power up our systems for the last 20% of this whacky week. There's been no shortage of catalysts---earnings, outlooks, economics, technicals, tough talk, top ticks, hope, despair and, of course, geopolitical chit chat--now we've just got to tie them all together in a neat little package. It's been a whirlwind of information and emotion, cookie, but make no mistake--there are no excuses. The game of attrition has only just begun and Darwin demands that you're at the top of your game.

Are we going higher or will we trade lower? I can tell you, with (almost) absolute certainty, that the answer is YES! I don't say this to be difficult, I'm simply trying to make the point that, in time, we'll likely have a chance to make better sales and cheaper purchases. What we must identify--and this holds the key to our collective success--is what horizon we choose to focus on. There are nuances, trends, phases and cycles. If you try to apply a blanket view across the frames, you're gonna drive yourself nutty!

The bulls will argue that it's always darkest before we climb the dawn of a new day and, well, they're right! History teaches us that the best entry points for stocks is in times of despair and there's nary a reason to buy. The problem is, these periods are often seen with the benefit of hindsight and by the time it's obvious, the opportunity has past. For every trader who nails the bottom and catches the cusp, there are thousands who drown trying. The trick is to remain proactive yet patient and aggressive yet controlled. It's not an easy task---but if it were easy, everyone would do it!

While I remain steadfastly bearish in my cycle view, I force myself to remain open minded on a daily basis. If I'm correct (and there's no guarantee that I am), there is a defined window in which we'll have the opportunity to trade these flickering ticks for a living. In other words, by the time we arrive at the final resting place of my "flatliner" thesis, there will be a handful of bullish phases, a littering of bullish trends and infinite bullish nuances. If we're to be all that we can be, we need to make hay when that sun shines.

I'm not certain that the eventual rally will constitute a full-fledged phase but that's ok--we don't need to decide right now. I feel pretty good that the stiff lift we've been discussing (but not yet biting on) will offer a decent opportunity on the upside. What I'm weighing, once again, is the timing and starting point--for if we're too early, it's got the potential to be very painful. The caveat to the Sham-side of our recent thesis is the very reason the market is struggling right now. There is corporate invisibility, the technical foundation is cracked and, as painful as it is to hear, we must appreciate the potential that an attack on Iraq will awake sleeper terrorist cells within our borders. I don't mean to be a downer--trust me--I just think it's important to appreciate the risks if you're gonna play the game.

On an entirely more important note, I wanted to put this all in perspective if I may. A good friend of mine, Dale, suddenly lost his mother this week and another friend, Jordan, is saying goodbye to his pops. As I talk with them, I'm reminded of the clarity I experienced when I said goodbye to my best friend, Ruby. It's sad, really, that it often takes something tragic to make us realize how trivial we can be as we race through this thing called life. We're on the brink of war, the economy is in recession and we're mired in arguably the worst bear market in history. You know what? It could be worse.

Good luck today...and I love you mom.

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