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The Canary Chronicles

By

Fare ye well into the bell!

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First to fall over when the atmosphere is less than perfect
Your sensibilities are shaken by the slightest defect
You live your life like a canary in a coalmine
You get so dizzy even walking in a straight line


(Sting)


After an initial press by the Ursine Uglies, Hoofy's Heroes hit the boards this morning (rebounded) with renewed purpose and staved off imminent elimination. I'm admittedly torn as I watch the action--I see the oversold stochastics and respect the bounce potential of the Matador Crowd. But with the breadth this bad and many levels broken, the fans in the stands may opt to exit early and leave the final fray for the bovine faithful.

After a few weeks of trading and fading (the acne hype above S&P 1220), I'm relatively balanced as we forge ahead. A water pistol to my head will force me to say "lower" but I'm not convinced that we don't see some Snappage first (a false breakdown would be poetic justice after the head-fake higher). My game plan is to take a deep breath and watch the tea leaves--particularly if we 'try' S&P 1200 again. If there isn't an improvement in the internals as we retest the broken levels (and alleviate the oversold condition), Boo may very well make a deep run.

All of this must be weighed in the context of tomorrow's twin dinger. Between the PPI (input prices) and Elmer (tightening money), the macro gorillas will likely trade equities as a monolithic asset class. I've made no secret of my view that we're between a rock (stagflation) and a hard place (deflation) with the dollar tipping the scales either way. How-and more importantly, when-that manifests will dictate the journey that brings us to our ultimate destination.

If I knew the way, Minyans, I would take you home. Alas, the best we can do is assimilate our primary metrics and try to find an advantageous risk/reward. With the technicals breaking, fundamentals decelerating, a potentially problematic structural leg (credit spreads/rising rates/flattening yield curve) and psychology complacent still, we must respect the Red Dye cry. That doesn't mean it's tomorrow's business, mind you, but each day draws us a little bit closer to an unavoidable reality.

Debbie Downer? Yeah, I know, but I'd rather be honest and wrong than tell you what you wanna hear with hopes you come back for more. Perhaps I'm missing the mark entirely but deep down, in places I've learned to trust, I "see" markets that are far from free and a future that is anything but bright. I humbly offer these vibes with the hope that it adds to your process and allows you to make more informed financial decisions. For by the time the trade becomes "obvious," the window of opportunity will have already closed.

As always, I hope this finds you well.

R.P.

No positions in stocks mentioned.
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