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The Tuesday Shuffle

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Alotta folks think that today's gonna be my day in the sun.

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Many have I loved
Many times been bitten
Many times I've gazed
Along the open road

(Led Zeppelin)



Good morning and welcome back to the scorning. Yesterday's drubbin' was a full-fledged bull snubbin' as Hoofs got beat down by a crimson bear clubbin'. At the end of the day in the minxy soiree, the once fertile fields were in pure disarray. Upon further reflection of this widespread infection, Boo has now found their stealth resurrection. Can this collection of ursine affection put down this Minx and stem the rejection? Or is it the bears who now need protection as Hoofy digs deep in the other direction? It's a swanky new session of critter obsession so strap yourselves in and let's leave an impression!

Despite the widespread slippage, a certain bravado can still be heard emanating from Matador City. Monday's Minx was certainly fugly and, on the heels of last week's bleak freak, you'd think that the bulls would be schvitzin' a bit more. There was certainly some agita floating around (as evidenced by the pop in the VXO) but, by and large, the decline has been relatively orderly. Now, as we enter a session that will likely be Hoofy's call to arms, we've gotta put our keppes together and figure out what it all means.

While most folks entered this past weekend relatively "sure" that a greater fool would assume their risk, the bulls have a much better chance at puttin' at today's Ritz. Why? For one, both the NDX and the Trannies are clinging to a double bottom (with the latter tickling the 200-day). For deux, 3M (MMM:NYSE) positively pre-announced yesterday and with the industrials a kitten's whisker from DOW 10K, that should embolden a few fence sitters to get involved. Finally, between all the crossing stochastics (sector indices/VXO) and further hair on the trinny TRIN TRIN, technicians will likely throw some hats in the ring during this "counter-trend" Tuesday.

Taking a step back, however, the picture muddles considerably. With the Dow and NASDAQ both down more than 3% for the young year, the potential for a further psychology shift is very much in play. As much as we don't like to admit it, our thought (and decision making) processes are often impacted by the color of our bottom line. If you extrapolate that to millions of investors, the migration phase of our minxy tri-fecta (denial/migration/panic) seems less "far fetched." Further, and leaving the bevy of bubbles alone for the time being, the chicken and the egg that is the economy and this market will likely perpetuate in many ways, shapes and forms. In other words, the longer this new found downtrend lasts, the more likely it will affect consumer spending and, eventually, the economy as a whole.

First things first, this is an expiration week and the "open interest" of outstanding options creates the potential for an exacerbation of volatility. More often than not, these swings occur during the days preceding the actual expiry as traders jockey their risk profiles and roll out paper. While March expiration has been "to buy" ten out of the last fourteen years, I've long maintained that it's difficult to gauge how these periods set up (as so many folks are gaming them). Suffice it to say, there will be a fair amount of crosscurrents on top of our normal metric base and stocks (with outsized open interest relative to average daily volume) will migrate towards their pins.

In a Elmerless session, my sense would be that these early green seeds would be faded (read: sold) and a probe (after yesterday's action) would briefly dip the Minx below S&P 1100 before a potential counter-trend Snapper. That script is certainly still feasible but with the 2:15 FOMC announcement looming--and everyone anticipating a yawner--we've gotta keep that right hand up for unexpected surprises. Just remember, Minyans, we could have a fairly meaty bounce and still find ourselves in the new found downtrend.

Good luck today.

R.P.

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