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Hump Day Musings


The quicker picker upper?


Monopoly Shopping...

The greenback is trading higher this morning (+50 bips) on speculation that Elmer will signal higher U.S. interest rates (he speaks to the House Budget committee at 10:00 EST) and after a European Union report showed stagnant euro-region growth. The yang to that yin are lower metals and we seeing some soft smelting on the heels of the dollar holler. I fully expect Gold $428 and Silver $7 to provide staunch technical support in the near-term (not advice).

Speaking of smeltage...

Novellus (NVLS) led a handful of companies who shared their affairs last night (some of them quite unexpectedly). While the chip check reaffirmed bookings and edged revenue guidance higher, there was some "jockeying" on their part on how exactly those numbers would be achieved. Further, on the heels of the recent SOX statue, the "whisper numbers" in hedgeland were a bit higher than what we got. With the stock trading lower this morning, we're once again reminded that good news (that isn't great) is negative in extended tapes just as bad news (that isn't horrid) can spark oversold rallies.

Compression session...

We've been talking about the yen for yield as hedge funds press bets in an effort to squeeze out returns. This morning, the Wall Street Journal shares the story of one of the smartest and most successful pharma seers around. This fund was highly concentrated in Biogen (BIIB) and Elan (ELN) into Monday's organic 2:1 splits. Everyone makes mistakes, we know, but a quote from the column stands out to these old eyes:

"But a potentially bigger problem in the low-interest-rate world is there is too much cheap money chasing too few good ideas. So some of the supposedly smart money is placing increasingly bigger bets, sometimes with inadequate risk control."

Sound familiar?

Party of Five...

Minyanville MOGI (man of great importance)--aka "Fish" or Kevin--joined Collins, Meehan, John and myself for our weekly Succofestivities last night. As we triple dipped our tortilla chips in Rosa's always excellent guacamole, the conversation turned to how the financial landscape is evolving in the post bubble world. Of particular interest, at least to me, was the notion that Wall Street research is in the midst of a radical evolution.

While the ball is already rolling (Smith Barney punted their technical team in favor of an outsourced provider), I sense that we've only seen the tip of the iceberg. The concerted effort to separate research from investment banking has left the former without a discernable revenue driver (other than being part of a broader product mix). That dynamic should continue to manifest and will bode well for independent value-added research platforms.

Let my inspiration flow in token rhyme, suggesting rhythm...

The Terrapin Station arrived on cue as Snapper found a foothold and stemmed the Monday muck. THE question on the lips of the critters is if our young turtle has the stamina to keep it up through the rest of the week. I opined yesterday that back-to-back weekly bail outs seemed a bit cute although I wanted to let Turnaround Tuesday play through. Now, as we ready to mount the Hump, Hoofy will have his work cut out for him (particularly if there are as many "trapped longs" as I believe there are).

Levels to monitor include S&P 1212 (1218), BKX 100, SOX 448 ('04 breakdown) and 440 (snazzy looking reverse dandruff), Russell 640 (triple top) and Trannies 3800 (December highs). And, as always, we'll keep a close eye on the breadth, macro, leadership, rotation and each other's back.

Look at me, the CRB, on my way to infinity...

Some vibes from uber-Minyan Tony Dwyer of FTN Midwest Research:

"The Current CRB Rally Is The Longest In History. Since 1960, there have been 5 multi-year spikes in Commodities as measured by the CRB Index, including the current instance. We measure a multi-year spike as being greater than 500 trading sessions. Guess which multi-year rally is the longest in duration by a few days (don't forget we are including the 1970's "secular move)?"

The answer is the current rally. Since the '01 low, the CRB has been up 68% over 858 trading days. That compares to a gain of 83% over 849 days from 08/77 - 11/80. The average gain of the 4 prior occurrences was 72% over 733 trading sessions. We would not add to overweight Materials positions from current levels - even if it is a "new secular move like the 1970's."

In closing, counselor....

The weekly Investor's Intelligence poll found that bullish sentiment climbed from 54.1% to 54.7% while Bearish sentiment edged from 21.4% to 22.1%. No great shakes week over week but a continued concern if causation should occur. Do you remember that commercial when they wet the Bounty paper towel and put various objects on it? That is the U.S. financial system, my friends, and alotta folks sure seem enamored with how strong our fabled fabric is. As long as it holds, they'll stay bullish and bold...

Good luck today.


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