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Four Score!


You're gonna spank what?


Good morning and welcome to the mourning. Four years to the day, in a tech led soiree, the bloom on the rose slipped off the bouquet. It was hard to foresee at the time (with the glee) that an ax wielding bear would soon chop down the tree. All the way down, as the bulls wore a frown, Boo chilled in the throne and assumed Hoofy's crown. It's now been a year since the bovine fought back and smacked the smug bears with their upside attack. Will they once again take this tape up for certain or will Boo pull back that nasty red curtain? It's Hump Day anew in the Minyanville zoo so let's take a peek at the crittery crew!

The crosscurrents were fierce in Tuesday's tussle as the bears pressed their bet and the bulls grasped for traction. When the dust settled, and while the final tally was muted, there was certainly no shortage of action. If this is a market of stocks rather than a stock market, the natural bridge is the sector plays that comprise the beast. We often discuss intra-market rotations and that theme remained very much in play. Indeed, if you happen to sort your screens by group, the migration was fairly well defined.

The cyclicals, weighed down by the oh-by-the-way $4 billion in General Electric (GE:NYSE) supply, broke the trendline that was in place since this whole party started. That, in a nutshell, was why the industrials underperformed and, as the 50-day moving average (DJIA 10,558) is already smoked, the 2004 lower band tag (DJIA 10,400) is now in Boo's crossed hair. It also placed the much debated consumer (safety) vs. cyclical (growth) on the front burner (a potential indicator of investor psychology) and that battle should heat up today on the heels of Procter & Gamble's (PG:NYSE) upside boost.

More importantly, as far as sector performances are concerned, the banks (BKX) showed an inkling of weakness yesterday as they approach their previous (January) high (acne support). The piggies have been, well, piggy in their upside gluttony and hold the key to the much broader vault. With the brokers relatively slippy (triple top above and important support at XBD 700), the money centers have been carrying the load and emboldening the bulls. With fresh (yawn) smoke in Fannie Mae (FNM:NYSE) this morning, it'll be interesting to see if the banks bother to blink.

In the tech trek, the semis held on for dear life yesterday after multiple dandruff infractions. SOX 475-480 is the next support zone (past resistance and former support) and, with the stochastics approaching (but not in) oversold territory, Hoofy will try to limit the chip dip at that level. It is worth noting and quoting my good friend John Roque of Natexis Bleichroeder as he's been white hot and on the spot. "Breadth is still deteriorating faster than price and is usually a leading indicator for price." It is his view that the SOX must trade to the low 400's before a meaningful oversold registers. Thanks John!

Over in the energy pit, the oil service and integrated oils still feel a bit cozy and have given some of their recent gains back. The OIH (oil service holder) is now sitting directly on the trendline (from the autumn lows) and with the Energy Information Association cutting its forecast for residual fuel demand in the US (and the German economy seemingly slowing), a respite shouldn't shock ya. Longer term, I still think this complex will relatively outperform as oil gets scarce and scarcer. Near-term, it could be a bit slick.

Finally, please read Brian's song on the refi cry and factor that into your daily mix. I am (and have been) of the opinion that our financial foundation is rotting beneath the souls of our shoes and it's a matter of time before our collective Fannie gets spanked. That won't matter until it does, as we know, so be sure to define your time horizon and risk profile while always leaving room for a margin of error. And enjoy the Hump, my friends, as you'll never have another March 10, 2004 in your entire lives.

Good luck today.

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