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Great Expectations

By

A scared bear makes for a dangerous beast.

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Good morning and welcome back to the wild ride. Yesterday's yo-yo ended on a firmer note as investors digested Elmer and braced for the Cisco Soliloquy. While Sir Chambo reported marginally better results and his guidance was "there," the whispers on the street seemingly sought a more assuring wink. Will the expectations game matter as we edge into Wednesday or are the animal spirits too tough to snuff? Power up and settle down, Minyans, Hump Day is set to begin and it's bound to get nutty!

Taking a step back, the Cisco (CSCO:Nasdaq) situation is a Minxy microcosm for our great debate. Sure, things are better than they were peceived to be a month ago (uncertainty lifted) but does that necessarily mean we can put our right hand down? Listening to Chambo, I experienced an odd sense of deja vu as the "inevitable" economic upturn and "cautious optimism" were discussed. Haven't we seen this movie before and, moreover, isn't that the very definition of hope?

The collective mindset is clearly obsessed with missing the upside and, once again, that's been a hallmark of every bear market trading top. Elmer laid it out there yesterday but, as a function of psychology, the market chose to read the text with their oft used rose colored glasses. In my (most humbled) opinion, there was nothing in either of yesterday's catalysts to change the bear case. As a matter of fact, I'm growing more resolute in my belief that a major turn is close at hand.

If I were to critique myself (imagine that), it's clear that my big picture bent has influenced my daily dance a bit too much. Still, I'm staring at a market blind with optimism (bull/bear 55.8%!), complacency (VIX Jordanesque), fat valuations (too rich to start a bull market), extended indices (salty stochastics), non-confirmation from the dollar and latent risk (debt, derivative, geopolitical).

Yes, there is a bull case (obviously) -- if there wasn't, we wouldn't be at these levels to begin with. The key to our success, however, is predicated on our ability to capture the disconnect between perception and reality. Could THIS time be different? Sure -- if the metrics that historically launched a new bull cycle have entered a new paradigm, we may find ourselves in a whole new world. Sounds familiar, doesn't it? I'm not ignoring the technical breakouts on high volume -- they've been factored into my thesis. The Minx is pricing in the very best case, however, and I don't believe it to be warranted.

While I'm unsure if the dandelion needs to "blow off" a bit more before exhaustion (NDX 1200?), I'm approaching higher prices as a gift, of sorts. In my mind's eye, lower levels are a function of "when," not "if" and, at the very least, a meaty pullback is lining up. Could a downdraft prove to be more severe than a simple retrenchment? Let's worry about that when we get there, cookie, one step at a time.

Finally, in an effort to keep it in perspective, I had dinner last night with Scotty Sklar and Jordana Holovach of Jacobs Cure. I sat down at the table with visions of flickering ticks dancing in my head before listening to a mother anxiously map out a plan to save her ailing child's life. I'll tell ya, Minyans, if you're biggest stress is market-related, you've got a lot to be thankful for. Think about it.

Have a great day.
position in csco, qqq
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