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The Rain Game


Europe is slipping hard--watch that closely!


You know in spite of all you gained
You still have to stand out in the pouring rain
One last voice is calling you
And I guess it's time you go

(Grateful Dead)

It's a beautiful morning in the greenhouse and Boo, wearing a pair of wayfarers, bounced into work with a schvitz eating grin. I was perplexed at first--after all, he hasn't exactly had the hot hand of late. When I asked him why he was so happy, he stopped in his tracks, removed his shades and simply said "It's a new day, Toddo, everybody in my family is healthy and I've got great friends. Besides, I've been doing this long enough to know that there will be ups and downs. If I spent this morning bummin' about yesterday, I'll surely miss the opportunities in front of us." Hmm, sweeping to the first order Boo--I like it!

The recent action serves as an excellent illustration of how our trading metrics assume different weightings at different junctures. As the market slid down the slippery slope, it seemed that every trader under the sun was a closet technician. Why not---the fundies were (are) stagnant, the structural was (is) uncertain, the psychology was drab and technical analysis (whether you love it or hate it) was (is) the most tangible metric. As the sentiment pendulum swung hard in the past few sessions, however, the levels we monitor have taken a back seat to the anxiety in the market. That doesn't mean they don't matter, Mon Frere, that just means they assumed a lower priority in our trading mix.

With that said, I will continue to actively monitor this metric in an attempt to identify a backdrop with which to trade. We all know the importance of S&P 870--it's a zone that changed the entire completion of the market when it broke in January. Historically, when these breakdown points are retested (particularly on a spike), they'll offer substantial resistance. Is this time indeed different? Perhaps--performance anxiety and the fear of missing is in vogue and while that's undeniably bearish from a broader perspective, it tends to exacerbate price action in the near term.

It's also worth noting that the European bourses are collectively challenging trendlines that have been in place since the November's Razor Burn top. If memory serves, the bulls were equally as vocal at that juncture (as well as early January) as the market ripped higher. Past performance is certainly no guarantee of future results (particularly in these unique times) but it's important to remain a student of the game and draw on our lessons learned from the Minx. In other words, we should always respect the price action but we must never defer to it.

It's interesting that the above levels coincide with gold sitting on a trendline and the euro/dollar approaching it's trendline at 1.05. As the macro indicators seem to be playing horse to the equity cart, we must continually monitor the global influences as we humbly find our way. As it stands, and please treat this subject, I plan on adding an arm into my metaphorical bear costume (to make 75% conviction) IF the Minx gets jiggy this morning.

Finally, please take a moment and peruse the fantastic Oscar VIP gift basket raffle in Minyanville. These are the same items given to presenters and award winners at the Academy Awards! 100% of the net proceeds will be donated to The Ruby Peck Foundation for Children's Education and the winner will be chosen Sunday at Minyanfest.

Good luck!

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