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March Madness


Orange Whip!


Good morning and welcome back to the Orange shack. The madness is here and we're not talking hoops as the critters prepare to dig in with their troops. The bulls had the 'mo as they started last week but they faded straight into the most recent freak. "I thought we would win and so did our crowd," said Hoofy the bull no longer as proud, "but just as Intel (INTC) seemed to lift the dark cloud, the ursine arrived and they got pretty loud." Will Boo's sharpened claws expose the bull flaws or can Hoofy step up for some welcome applause? Dig in for this gig as it's sure gonna thrill and get ready to rock for a week in the 'Ville!

There's something about March that makes us wanna sit on the edge of our seat and watch the games. Perhaps it's the realization that anything can happen as a collection of Cinderella's, over-achievers and fan favorites commingle in a delicate dance of minxy romance. The last few weeks have been true to form, starting with a lopsided victory by the bulls and ending in a stunning upset by the underdog bears. And while the first coupla rounds have surely been exciting, true sports fans know that the nuttiness has only just began.

There is nothing new or different to twin deficits, stubbornly high energy prices or the specter of higher rates--they've been discussed in hushed tones in Red Dye for a long time but deemed "unproblematic" because prices didn't validate their existence. Only time will tell if the future is now but I will offer that talk of a "wall of worry" is premature. With volatilities hovering near decade lows and sentiment surveys skewed as they are, there is plenty of room for a migration back to the center of the scale.

Test number one will arrive this morning as the S&P sits on support (1195) and the macro variables (dollar, crude, fixed income) seem tame. Hoofy is quick to offer that latest shake is a simple alleviation of the "obvious upside" trade. A short seven days ago, every media outlet championed the virtues of equity acne and the clear sailing ahead. The question now becomes whether this latest angst was enough to usher in the intermediate-term window that we've been respecting. I still think it's a high risk and very cute proposition but the goal when trading is to see all sides even if (and particularly if) you're positioned one way.

As an aside, and because I want to share this before we shove off for a fresh week, I noticed that the weekend press was flush with chatter of an energy bubble. Minyan veterans know that I believe that we're edging through a number of bubbles--debt, derivatives, dollar, psychology, equity echoes-but I will offer that talk of an energy pop is entirely premature. While I opined last week that the energy patch likely got ahead of itself (Exxon Mobil (XOM)), beauty is in the eye of the holder. Lest we forget, energy still accounts for less than 10% of the S&P while the financials are 20% plus. By the time I take my own children to the circus (read: long-term), those two facts will flip.

It promises to be a busy week as we'll start with some jaw bones (Yellen, Snow), edge into retail sales (Tuesday), hit the hole with Duke & Duke (big cap broker reports), stay the course with Mr. Beeks and finish up Friday with an S&P rebalance. We'll start today's tourney with a pink Europe, grabby greenback (+60 bips), heavy metals and firm stateside futures.

Expect to see a downside probe (after a fugly week) and then watch the breadth, banks (BKX is sitting on the 200-day) and beta for guidance.

Good luck today.


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