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Chasing Amy

By

Dixie Chicken Little...

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If you'll be my Dixie chicken
I'll be your Tennessee lamb
And we can walk together
Down in Dixieland, down in Dixieland,


(Little Feat)


Good morning and welcome back to the pale green track. The big bad events are out of the way and the bulls cut a rug at their newfound soiree. The late Friday lift was a gift for their crew as they climbed to new heights and again mocked young Boo. "The tea leaves taste great and the bears took the bait," said Hoofy the bull from his bovine estate, "I felt their pain (and I can relate) but they better wake up before it's too late!" Have we seen the turn from the previous burn or does there remain ample cause for concern? A new week is here so get ready to thrill as we roll up our sleeves for a romp in the 'Ville!

After a nosty Janauary that gut checked most optimists, the bovine opine that we're back on track. Technical analysis isn't a panacea but it does offer validation for those in search of assurance. With Friday's late spurt, most major averages negated (potentially) fugly charts and ushered in a fresh spate of towel tossing. That, in turn, triggered the fence sitters and shook out the bears who were already on their heels. While the pain was hard to hear (read: no volume), Hoofy has officially wrestled the benefit of the doubt back to Matador City.

Correlation is a trader's best buddy and it stings when your friends betray you. The ability of the equity market to rally in tandem with (acne in) the dollar burned the bears and reversed the recent curse. We haven't heard the last of the "deflation vs. stagflation" debate (or the dollar as a proxy thereof) but topics of conversation are dictated by the ultimate arbiter. With Hoofy in control, the noisy joy will center on merger mania and the perception of a stronger economy (vs. the reality of a debt induced echo bubble).

The question we must ask is whether this latest lift is a simple bounce from (and an alleviation of) an oversold condition or a broader upside proposition (that could carry us to the other side of technical exhaustion). The proof will be in the pudding but clues remained nestled in the near-term muck. Again, with Friday's fly through multiple resistance levels, the bulls will have first serve in today's curve. Watch BKX 102 (to hold on the probe), the internals (until they stop working) and keep a keen eye for continued intramarket and intermarket rotation and migration.

The biggie earnings reports of the week will arrive Tuesday (Cisco) and Thursday (Dell) and they'll be the last bogies on the tech radar. We'll weigh through that fray with 8-year lows in the VXO (hasn't mattered yet) and an increasing acceptance that January was the exception rather than the rule. There are reasons for both sides of the minxy rhyme here so please be careful, assess your risk and be mindful of the probability spectrum. One day at a time, Minyans, and we'll get there.

Good luck today.

R.P.

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