Be on the ball!
"There's a tradition in tournament play- don't talk about the next step until you've climbed the one in front of you. I'm sure going to the state finals is beyond your wildest dreams, so let's just keep it right there."
-Coach Norman Dale, Hoosiers
Good morning and welcome back to the inside track. Last week's final four was a crimson eyesore that left the ursine longing for more. The damage was done in one single day but the seeds of unrest seem destined to stay. "The smoke from the hood is starting to smell," said Boo to his crew from the Red Dye hotel, "while most of the Street is reluctant to sell, that in itself just doesn't bode well." Can the bovine soon bounce and escape a new trounce or are bears everywhere getting ready to pounce? A new week is here and it's sure to fulfill so power it up for a romp through the 'Ville.
Elmer arrived last week with a cross-over dribble that left his language in tact but opened the door for a more aggressive posture. It's hard to fault our bespeckled Fed chief for acknowledging the inflationary forces although a blanket statement doesn't fully address the inherent dilemma. While a more stringent monetary policy (or alluding to such) buoyed the dollar and, in turn, pressured liquidity driven vehicles (commodities, equities, emerging markets), the other side of our painted corner emerged in lock-step. With the structural smoke seeping from the 'hood (Aunt Fannie (FNM), General Motors (GM) and Amer Int'l Group (AIG)), the central bank must walk a tightrope between liquidity doves and interest rate hawks.
The true conundrum, from where I sit, is the balance between imported inflation and stealth deflation. If the Fed continues to raise rates, the ripple effect through the leveraged economic "recovery" (read: debt induced demand) will have a profound effect on the consumer, housing market (ARMS) and corporate margins. If they ease away from such a strategy, the dollar squalor will continue to manifest and strain the intricate balance of the global financial mechanism. These are admittedly big picture concerns but they're edging closer with each passing day and must remain on our radar.
The near-term dynamic will be predicated on the looming quarter-end and the attendant agendas. It's no secret that funds are struggling and the pressure for performance will impact this week's price action. The tape remains oversold and, as such, Snapper is on high alert for cameos on (and of) demand. We walked through the potential scenarios on Thursday and they remain very much in play. The first order of business for the bulls will be to mount the near-term hump (NDX 1482/SOX 420/Google $181) and if they can push through, their sights will be set on fiercer resistance at S&P 1200 and BKX 99.
As always, our trusty tea leaves will help pave the way through another day. The internals remain focus one (as an intraday tell), along with the finicky financials (XBD 144 is huge) and slinky semis. The nets (Google) are also a focus as the "bang for the buck" crowd might look for some chitty chitty in Beta City. And, of course, we'll need to keep an eye on the macro dance as the dollar, crude, metals and fixed income compete for investor attention ahead of the April letters.
Good luck today.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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