Bears and Bunnies
Past resistance is future support!
Good morning and welcome back to the swarmin'. Last week's rise to the minxy high skies was the ultimate prize in the green bovine eyes. "I knew all along that the bears would be wrong," said Hoofy the bull as he sang his old song, "but it's only begun (for those who stand long) so come jump on this tape that's both righteous and strong!" Is it now time to pity the ursine committee and climb on the train to Matador City? Or can Boo engineer a quick furry ditty and shift the mindset from giddy to pity? It's a spankin' new week for both new thrills and chills so strap yourself in for a cruise through the 'Ville!
Friday's report quelled fears far and wide that the year long parade would soon start to slide. Indeed, if the last bastion of bearish ration was the fuzzy employment picture, the Red Dye crowd now isn't as loud. Forget, for a moment, the chorus of Boos insisting that the BLS does more massaging than a day spa. The fact remains that the landscape upticked and the "Ya see? It really WAS a lagging indicator!" voice became more persuasive on the margin. Yes, Boo's crew is under review as they search for flies in the ointment anew.
That sigh of relief blew the Minx through our much discussed levels of resistance and S&P 1125 (37), NDX 1450-60 and Dow 10,400 all wilted under the glaring stare of the stepping stair. While a stauncher ceiling has begun to whisper in the distance (S&P 1160), the technical (and psychological) picture gives Hoofy the slight edge into earnings. Then, the schvitz will hit the proverbial fan as conference calls and future outlooks blast the fundamental metric right smack in our face. Most everyone is anticipating good news and while that's quite possible, it is also very much expected.
Lost in the economic shuffle last week was the oil slick that flipped price quick. A few short weeks after crude was rudely dancing above $38, it's now trading hands--or barrels--at $34 and change. That likely buoyed sentiment as well--the stagflation equation is dependent on higher input prices, a lower dollar (imported inflation), joblessness and sluggish growth. Perception is reality, however, and there is a very powerful agenda that has a vested interest in selling a state of financial nirvana. And while we may perpetuate the dream--via borrowing, stimulus and aggressive policies--the ramifications will likely be pushed out rather than eliminated.
Alcoa (AA:NYSE), Yahoo! (YHOO:NASD) and General Electric (GE:NYSE) will soon pave the way before the bunny soiree. They'll share the spotlight with the geopolitical news--including more hearings from Washington--they'll likely be more of a reality TV show rather than an actionable catalyst. Still, with a full-fledged sentiment bubble as a backdrop, we must monitor and respect the delicate nature of public opinion. That, along with the discounting mechanism that is the market, serve as a balance to the immediate gratification trade.
The financials, semis, breadth, trannies, retail and the macro asset classes will be the chief trading tells to start the week. Also keep your hands on that dial as we listen for volume in the averages. With the previous dip on decent volume and thinner trade accompanying the lift, it's worthy of a mention if nothing else. Also remember, Minyans, that the last time job growth was this robust was in the Spring of 2000. That's a nonsensical comparison--maybe--but it serves as a good reminder to ye faithful. For no matter what phase of the trading maze we're in, the news is always best near the top.
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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