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Cinnamon Buns




A dreamer of pictures
I run in the night
You see us together
Chasing the moonlight

(Neil Young)

Good morning and welcome back to the running pack. A new week arrived in the 'Ville yesterday as Hoofy stepped up with something to say. He started out strong and then staked his claim of putting the Red Dye effort to shame. "The acne was fierce with mojo to boot," he said to his friends while they were in route, "but just as the tape began to bear fruit, the ursine arrived to halt the pursuit." Can Boo make a stand in the face of demand or will he succumb to the bovine command? We'll know soon enough as we suck down this joe and ready ourselves for a minxy new show!

Entering the Monday mix, the bulls seemed to have the ducks quackin' in synch. The S&P and Dow both triggered LOUD technical breakouts, leadership was evident and Snapper had absorbed supply two weeks in a row. And while we've been keeping an eye on the muted volume, non-confirmations and lopsided sentiment, the path of least resistance ran through Matador City. It was there for Hoofy's taking and it didn't take him long to get others involved. By the time we were eyeing our Cobb salads, the screens were plush with a royal flush (aces back to back).

There are a few logical reasons why the bulls couldn't close the deal. The techs, enjoying some upside ketchup, ran right into NDX 1550 (the top end of the recent range) while the real leaders--the S&P-type names--are extended with lofty stochastics. That, coupled with stubborn crude, universal cheerleading and looming mid-quarters, dictated that a dose of reality was prudent. And while the credit markets continue to acquiesce, that potential positive must be weighed against the compression that has emerged from the yen for yield.

There are a few dynamics in play and we must weigh them in the context of time. In the uber-near term, my sense is that yesterday (today) may be a short-term top. It's a dicey assertion but the yellow flags will fly IF Boo can find some motivated supply. In the long-term, I think it's as easy as equities vs. the greenback (imported inflation (dollar devaluation) vs. deflation) with the foreign holders acting as judge and jury. In between, we have a window where virtually anything can happen and we must respect all sides of the probability spectrum.

If this juncture seems hard it's because it is--there are alotta competing forces in play and powerful stakes at hand. The conditional elements for a ramp (liquidity) and a melt (compression) are firmly in place and we should see both sides. The task at hand is to find a methodology that is suited to your style while allowing for a margin of error. I continue to believe that energy and metals are intuitive longer-term trends while tech and financials will face a headwind. Again, it's all about your time horizon so keep it in perspective and understand that a dollar saved is a dollar earned.

We power up this Tuesday pup to find Europe and Japan pink, the dollar giving back yesterday's gains (note the DXY dandruff) and the metals a touch higher. Texan (TXN), which chopped off the top of previous guidance, and Ryland (RYL), having guided lower, should color the semis and homies respectively so please keep an eye on those sectors. Other tea leaves to note include NDX 1550-60 (resistance), S&P 1218 (former acne), market internals and the all-important piggies.

Good luck today.


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