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Thunder Road


This is bull!


You can hide `neath your covers and study your pain
Make crosses from your lovers, throw roses in the rain
Waste your summer praying in vain
For a savior to rise from these streets

(Bruce Springsteen)

Good morning and welcome back to the Hump Day flack. Sir Elmer arrived in the 'Ville yesterday and stepped to the mike with something to say. His words were the same but added concern inflation was near and might soon return. "Does the master emcee finally see energy?" joked Boo to his crew of the most recent plea, "These fears are quite old, I think you'll agree, as evidenced by the high CRB!" Will admitting this fact get the bulls to react or allow the bovine to keep Hoofy on track? We'll know soon enough as we suck down the jo' and ready ourselves for a minxy new show.

Tensions are high on Wall Street these days as portfolio managers get set to pen their first quarter notes. It hasn't been a banner start for most as, with the exception of energy bulls, few mainstay averages or strategies have been working. Last night, while dining with some old school sell-side types, they told me that alotta hedge fund models are showing signs of stress. That's not a shocker, I suppose, as we've spoken of the "compression" in our industry for a long time. Hearing it and living it are two different things, however, and the emotional toll seems to be wearing thin on the collective psyche.

The structural elements are at the forefront of our metric assimilation as the combination of credit market sparks, interest rate hate and balance sheet smoke are the focus du jour. Not to be forgotten, however, is the technical damage that has steadily unfolded over the past few weeks. While many of my mainstay stochastics are "hooking" at the bottom (bullish) and we are oversold by several measures, we've taken out support in the S&P, NDX, BKX, SOX and a number of other primary proxies. All eyes now turn to S&P 1160 ('04 acne) and, considering the field position, that 'should' hold the first probe.

The "optimal" setup for Boo would have been a low volume, non-confirming retest of previous support (and current resistance) at S&P 1200 and BKX 99. That is what I was looking for and, consistent with the path of maximum frustration, that never came to bear. There were some notable probes that failed to hold (Google, SOX) and they're certainly worth noting. However, as our goal is to identify the most advantageous risk/reward dynamic, I never saw the fat pitch I was looking to hit. It's certainly frustrating considering my bearish bent but it's not necessary to play every trade, it's only necessary to win a higher percentage of the trades we choose to make.

Corrections, by definition, convert some believers while reversals are characterized by a steadfast belief. There's no shortage of bulls in the Street as most have been conditioned to buy the dips. It remains to be seen if the recent action was a sea change but we must respect that potential. A lot depends on a script that is still being written and agendas that are shifting with the tide. I'll be keying on the breadth (been horrid), financials (the breach of the BKX 200-day was 'the' tell) and the macro dance (into quarter-end) while using the technical landscape as a backdrop and framework.

Beeks swung by with the CPI and the marginal uptick is flaming further inflation fears. Again, S&P 1160 will serve as a collective focus as it's the last legitimate level that may serve as a bovine backstop. Please keep an eye on General Motors (GM) as some are hoping to see some proactive posturing by the faux financial. If this situation-and, by extension, the credit markets-can settle, equity bulls may find their spark. I remain of the opinion that the ills of the Minx are far-reaching and deep-rooted but our journey is a series of small steps and we must digest them as such.

Good luck today.

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