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Have fun boys--I'll be by the pool!


Your black cards can make you money
So you hide them when you're able
In the land of milk and honey
You must put them on the table

(Steely Dan)

Good morning and welcome back to the quiet slack. The holiday lull in the city of critters is causing some angst amongst the fence sitters. There are bulls to the left and bears to the right and a snake in the middle of the tetherball fight. "Boo has a firm grasp of my head and it hurts," Sammy offered out loud from the sandy desert, "but Hoofs won't let loose of my tail as he flirts with the upside traction that is coming in spurts!" Will our slithery snake awake for a break or continue to ache from the two-sided shake? Toss in your chips and put out your feelers as we reach for the cards that are dealt by the dealers!

There are junctures in the market that reek of indicision and now is one of those times. You can almost see the 'tweeners looking for direction and itchin' to climb aboard the next tradable leg. To be sure, there is enough anecdotal evidence floating around that traders will kick themselves for not reading the writing on the wall. If we rally, that scribble was noise on a wall of worry. Should we fail, however, the building blocks of the ursine thesis have been stacking in kind. What's a critter to do?

Effective (and profitable) trading is a function of continous metric assimilation. When we look at our primary cornerstones--structural, psychological, fundamental and technical--there is a two-sided argument for each. There is the electoral agenda...but the stress to the system is palpable. There is near-term angst...but a much broader complacency. Corporate America is "beating the number"...but earnings are decelerating. And while a number of short-term indicators and oscillators are constructive...some very real damage has been done to the technical infrastructure.

I have my (humble) view as to where we're going (stagflation) and I can even "see" how we're gonna get there (crisis of confidence). The question, in my mind's eye, isn't when we'll arrive--it's when the collective perception recognizes where we are. I may be mistaken (I was wrong as a song last year)--or I may be very early--but the puzzle seems to be fitting together. It's almost as if Hoofy is dancing to the music as the walls slowly close in around him. You can choose to stay or play every day but you should, at the very least, recognize the potential risk in the system.

What, you ask, might trigger a psychological sea change? A confluence of factors, probably, but it'll likely include a geopolitical element at some level. That could include perception of the war, political choices (or lack thereof), terror or other "non-tangible" factors. And while that may spark the chain reaction, the resulting dominos have been in place long before Iraq, September 11th or even this administration (note that Elmer isn't excused). None of this will matter while the screens are green but when the world's largest thermometer dips into the red, you can be certain that it will.

I've digressed (again) but these thoughts stirred as I walked to work this (beautiful) morning and read headline after headline of accusation, fraud, war, litigation and energy shocks. All the while, the Minx is steady (thank you very much) and we remain entrenched in a (boring) trading range. Is this a churn (and a very muted Biggs bounce)? Or is this simply shaking out the nervous Nellies before we get back, Jack, and do it again? Lotsa resistance above and little conviction below. That's not advice--it's simply what I see in the marketplace.

Good luck today.


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