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Wind Chimes


Watch the rate-sensitive issues on the back end of the Fed!


How many years can a mountain exist?
Before it's washed to the sea?
The answer, my friend, is blowin' in the wind,
The answer is blowin' in the wind.

(Bob Dylan)

Good morning and welcome back to ducks that quack. We've waited in vain for this day to arrive and the flickering ticks are ready to thrive. With bears on the left and bulls to the right, the critters are hoping the Fed will shed light. "We all know that Elmer is really a dove," said Hoofy the bull in a labor of love, "this tape simply needs a good upside shove to clear out the levels resting above!" Will we get some juice that will serve to seduce or will Boo tie the noose on this telegraphed goose? It's tricky, it's Tuesday, it's ready to thrill so roll up those sleeves for a romp in the 'Ville!

After 15 years of trading and five years of writing, I've come to learn that a similar discipline applies to both crafts. No matter how many times you look at the same set-up, there are only so many metaphors to describe similar spades. We've spent the better part of the past week discussing the overhead resistance, we've given a respectful nod to the notable nervousness, we're keenly aware that some savvy sages are seeking a rally and, in the end, we're quite conscious of the true conundrum that we collectively face. Now it's time to tie it all together and seek profitability along this truly treacherous path.

I'm not smart enough to tell you how the next couple of days or few percent play out (nor is that my mission). What I can do is navigate the crosscurrents with you and hope to add value by sharing my eyes. Unfortunately, as a function of the "more motion than movement" churn we've witnessed of late, not much has changed on the technical front. We're still mired under multiple levels--starting with S&P 1163 and continuing through NDX 1460 and DJIA 10,400--and the view from 40,000 feet still warrants caution. That can change as a function of higher prices, naturally, but if it ain't broke, don't fix it. As it stands, we are broken and Hoofy has his hands full as he attempts to repair psychology.

The bigger question on the lips of the critters is whether, once we digest this next hike, the Fed will pull a dove out of their magic hat. The crowd seems split on this slight of hand although prevailing wisdom is that Elmer will remain as accommodative as possible in the context of a tightening. The trick-and it is nothing less-is whether they can saw the minxy lady in half, placating inflation on one side and sluggish growth on the other. The (flattening) yield curve is telling us that the crowd is getting impatient but most economists-with the notable exception of Stephen Roach-remain propped at the punch bowl.

As a function of the hedge fund hot potato and an immediate gratification mindset, it's become increasingly difficult to discern the ever-elusive edge. Moreover, it feels like frustration is starting to manifest as compression crimps the tails of return. I don't wanna be a Debbie Downer but the simple truth is that the road ahead remains decidedly daunting. Fiscal literacy and intelligent decisions won't arrive in a lightning round or be handed to us on a silver platter. It's gonna take a ton of work, a lot of patience and managed expectations as we weave our way through the minxy fray. Don't be intimidated--just be conscious. Awareness is the first step towards capital preservation and, we hope, profitability.

We power up Sir Elmer's pup to find Europe slightly green (with the exception of the FTSE, which is playing some upside ketchup), Asian markets (that decided to open) pretty in pink, the dollar grinding towards the 200-day (DXY 85) and the metals struggling for respect. The precious proxies have struggled to find their footing (silver looks dicey on a chart) but I remain of the humble opinion that, if your horizon is five to ten years, this complex-along with energy issues-remains an intuitive alternative to tech, financials and the greenback itself.

Enjoy your journey today.

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