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Steelin' and Reelin'

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The action in Citigroup is giving me cause for pause.

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Your everlasting summer you can see it fading fast
So you grab a piece of something that you think is gonna last
You wouldn't know a diamond if you held it in your hand
The things you think are precious I can't understand


(Steely Dan)



The afternoon drip continues to slip as the bulls try to steady the bovine ship. The action today has been lethargic from the word "coffee"--it started overseas, filtered into the morning futes, seeped into the breadth (still 2:1 negative) and then pointed our leadership sectors due south. Now, the only question that remains is whether Snapper can join his Maryland brethren and lead the Terrapins to another title.

I've spent a fair amount of time on the phone with my trading cronies and the prevalent opinion is that further upside is a function of 'when' and not 'if.' They point to the strong fundies, historic TRIN readings, electoral agendas and newfound bearishness as their reasons for being. When I asked them about the mirror image last year at this time--when things were "equally" as bad--they brushed it off as inconsequential. I'll tell ya, if I didn't know better (I don't), I'd say that the rhetoric reeks of "denial!"

What isn't debatable is the technical damage that's been done to this tape. The NASDAQ, after last year's parabolic frolic, is now firmly entrenched in a series of lower highs and lower lows (read: downtrend). In addition, the three letter names--the last bastion of safety for many of Hoofy's pals--have now come under pressure and don't have discernable support for another 50 handles. That certainly doesn't mean it's today's business but the constant crutch that was the technical trend has been removed. Duly noted.

Where is this tape going? Tell me the risk premium (and price discovery) associated with increased ajita and you'll have your answer. The uptick in volatility was a long time coming as the writing was on the other asset class walls. With that said--and this is important--be very careful not to trade as a function of perceived "terror." There are a whole heckuva lotta crosscurrents in this market and focusing on a single issue will leave you vulnerable to a minxy uppercut.

As far as the rest of today's session, the bulls (and turtles) are eyeing yesterday's lows on both the S's and N's and as long as we meander 'around' those levels, Snapper has a shot. Remember, Minyans, markets that are heavy all day tend to end that way (particularly when the breadth is skewed from the opening bell), so if he's gonna dance his jig, he'd better start soon. Tread carefully, don't trade "just to trade" and regardless of what happens, there will be no looking back. That's the definition of wasted energy.

Good luck into the close.


R.P.
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