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Quivering Timbers


Setting stops removes emotion.


Speeding arrow, sharp and narrow,
What a lot of fleeting matters you have spurned.
Several seasons with their treasons,
Wrap the babe in scarlet colors, call it your own

(Grateful Dead)

Good morning and welcome back to the critter shack. With last week's freak still on our mind, it's time to dig in for a fresh five day grind. The battle is fierce as we fight the good fight and search for the spark that is sure to ignite. "We took a few shots in the chops that's for sure," said Hoofy the bull feeling somewhat secure, "If we can absorb and further endure, we'll surely embark on a Matador tour!" Will the bovine opine that the market is fine and finally climb to their self-proclaimed shrine? Or is the stage set for a further decline as we test the rest of our technical lines? We'll know soon enough as we shake off the fog and ready anew for the Minyanville jog!

One of the oldest axioms on Wall Street is that the reaction to news is more telling than the news itself. A week ago, the bears argued that the inability for the Minx to trade higher (on the heels of strong earnings) was proof positive that optimism was already baked into prices. Today, as we look back at last week's rate hike and the S&P auto puke, the bulls are posing similar questions to the hung and hungry jury. The taste test will begin in a few hours as Hoofy and Boo take turns on the stand.

As we digest the fundamental data points and seek to assess the structural implications, the technical landscape continues to act as a framework with which to measure risk. In that vein, and giving a nod of respect to the bulls for being able to retake S&P 1163, the burden of proof runs through Red Dye. And while the risk to this methodology is that "things are better higher"--an inherent flaw of technical analysis--the bears will continue to lean against DJIA 10,400 and NDX 1460 they offer the tightest near-term set-up.

I enter the 'Ville sporting two legs in my metaphorical fur (50% conviction on the short-side) as we continue to see more motion than movement. Despite last week's marginal gains, we remain stuck in the mud under previous support (current resistance). That's textbook churn until proven otherwise and the Matador Crowd will need to step up if they're to step out. Keep an eye on the banks (failed at the 200-day last week), the brokers (suddenly smitten with M&A fever), beta (psychology proxy for the NDX), breadth (single best intraday tell) and the macro (for monolithic movements).

We power up this Monday pup to find a pink (slightly red) Europe, quiet Asian markets, gold sitting on the 200-day support (as the dollar eyes similar resistance above) and the stateside futes still sleeping. This tape has been a lesson in frustration as good news has gotten sold, bad news has been gobbled up and 8000 hedgies are stuck in the middle with you.

Discipline. Patience. Perspective.

Good luck today.


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