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Shadow Dancer


What's a bull to do?


Blue, blue windows behind the stars,
Yellow moon on the rise,
Big birds flying across the sky,
Throwing shadows on our eyes.

(Neil Young)

It's been a long week for the flickering freak as we ready ourselves for the minxy critique. As there is simply a tremendous amount of information out there (and Succo nabbed me for a back-to-back 'fest last night), I'm gonna spill my crowded keppe and leave it all on the field as we feel towards the finish line. I know you're tired-I'm know I'm fried-but this is it, cookie-the big leagues. Pour yourself a fresh cup of jo', splash some water on that puss and pick the proper perspective. We're almost there.

The obvious focus this morning is the big blue dog pooh (IBM) that littered the landscape after the close. I can't imagine this was a massive shocker-the stock hasn't seen Matador City since March-but the timing and magnitude clearly came at the wrong time for the tape. Be that as it may-and it may be a lot-I will remind ye faithful of the importance of field position when assessing risk. This stock has been straight down and on her heels for a reason and much of this (near-term trading) malaise may already be reflected in the early morning prices.

Captain Smirk arrived this morning in the form of General Electric (GE) and, to hear the teletubbies gush, they've cured cancer, won the World Series and found Willy Wonka's golden wrapper. I know the report was "solid" and Immelt was more confident than a young Tyson but one company does not a market make. The stock, which has been mired in a prolonged pennant, needs to crack either side of $35 or $36.25 to awake technically. And I will again offer that this conglomerate, much like the other General (GM), is a financial stock dressed in drag. In other words, things like the (flattening) yield curve and structural smoke matter more than how many light bulbs are sold.

The Citi (C) never sleeps? Not this city, and not today, as the world's most important stock is forced to share the stage with the other elephants in the room. The report wasn't an outlier either way and I'll point to the process above for a similar assimilation. Where we're going, and the state of the union, is more important than a backward looking balance sheet. My sense is that Boo is lurking above and leaning against tranched technical resistance, ready to unleash the hounds on any hint of Hoofy's hither. $46.20 (200-day moving average) and $47.50 (right shoulder) are intuitive areas of hidden hibernation.

Taking a look at the actual union, yesterday's fray was fairly frazzled as a confluence of dynamics serendipitously coincided. We had the transports, down three percent and through the 200-day average, making fresh '05 lows and putting a feather in the Dow theorist caps. There were fresh technical breaks as the DJIA wet the bed and the NDX broke the churn channel at 1460 (note the textbook retest and fail). Apple (AAPL), a former leader, took a 10% haircut and soured Granny. The breadth was the definition of fugly, General Motors was nosty, expiration exacerbated the volatility and the dollar seemed to steal the demand side of the reflation equation.

I've been in the "sell rallies" camp for the better part of the past month (year?) and it seems like the wheels are starting to fall off the wagon. Still, and while I strongly believe that serious downside risk remains, I'm not so sure it's today's business. The combination of technical support (S&P 1150-60), expiration "magnets," and pressy hedgies may alter the path of maximum frustration. For my part, I'll be carefully watching the tea leaves (as I'm apt to do) and will assess the mess rather than guess.

Good luck today.

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