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Back Scratch

By

Thanks Jo Jo!

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Get back, get back.
Get back to where you once belonged
Get back, get back.
Get back to where you once belonged.


(The Beatles)


Good morning and welcome back to the Tuesday flack. With yesterday's music fading away, it's time to decide if the bulls wanna stay. They tried to get high since the FOMC but couldn't chew through the ursine debris. "We're SO oversold!" mocked Boo feeling bold after shaking away the multiyear mold, "If the big picture blues begin to unfold, a whole lotta stuff is gonna get sold!" Will he unleash the punch to release his bear hunch or can Hoofy & Co. step up for some lunch? A fresh set is here so please turn around as we open the doors and unleash the new hounds!

Last night, after digesting a moody and murky Monday, I sat down to think about the state of affairs. I thought about the tape, mentally walked through the metrics, pondered the big picture dilemma, looked at the upcoming calendar and then...stopped. Through the years, I've found that I have a tendency to over-think the action and out-think myself. It's crowded upstairs, I'll tell ya, and it's easy to get lost in thought as I venture through Minyanville.

The common assertion from those in the "know" is that the tape is oversold and ripe for a bounce. It's hard to argue that point as a slew of oscillators and indicators are in the green zone and revving their engines. The other side to that argument is that we've broken numerous technical levels in the S&P, BKX, NDX and SOX while others (DJIA and XBD) are dangerously loose and tightening the noose. Most folks have been anxiously awaiting the bounce-either to profit long or establish shorts-but the recent rinse has offered little in the way of minxy assistance.

One of the first things I learned back in the day was the subtle difference between basing and churning. The former is when the tape trades in a general zone for a period of time and creates a "base" to support a move higher. The latter is similar action but typically occurs below technical support and precedes further decline. Stripping away the daily noise, the recent action reeks of buttah as traders whip each other around and get nowhere fast.

There are a few elements to pay particular attention to as we ready ourselves for the fresh set. S&P 1160ish and DJIA 10,375 are pretty important areas of support and given how oversold we are (sorry), it makes sense for the Matador Crowd to defend those levels. Still, we'll need to see a marked improvement in the internal readings of the marketplace. Uber-Minyan John Roque of Natexis Bleichroeder notes that breadth peaked on March 7th (coincident with the S&P 500's recent top) and is off nearly 9%, or more than twice that of the S&P. If advancers don't start outpacing decliners, the broad market will likely start playing downside ketchup.

We power up this Tuesday pup to find sour sushi overseas (Nikkei -1.63%), pink (slightly red) bourses, giveback in the greenback (DXY -30 bips) and softer stateside futures. After a long weekend and in front of Friday's orange crop report, we could see some pick-up and posturing as the gorillas manicure into quarter-end. Play smart, trade disciplined and don't bet for the sake of betting. At the end of the session, it doesn't matter how many trades you make-it only matters how many trades you win.

Good luck today.


R.P.
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