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Moby's Shtick

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We can slip nicely from here and still be in an uptrend

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Good morning and welcome to the whale's tales. When IBM announced that it was the target of an SEC probe last week, the tape blinked and giggled higher. When MSFT fessed that it faces "significant challenges," traders quickly quarantined the Redwood redness. With yesterday's FRE bombshell, the Minx was force fed yet another high profile serving of humble pie. The ability to digest bad news is unequivocally bullish, this we know, but the piles of straw are bound to irk the camel at some point. The zillion dollar question then becomes quite easy: When will the camel face his hump?

There are a lotta crosscurrents in the today's marketplace but perhaps none is more important than the number 15. That's how many days are left before portfolio managers have to dust off their keyboards and pen their second quarter letter. While the focus (anxiety) is on the race for relative performance, there's been little discussion that the third quarter is right around the corner. In other words, cookie, it's the second half--where's the recovery?

There are two schools of thought in that regard. The "trend is your friend" crowd will tell you not to sweat it and let the tape tell you where she wants to go. That's been the best strategy since mid-March and the dip buyers have been rewarded in kind. At a point, however, we must ask ourselves if a stampeding herd is where we wanna be. Over the years, rally attempts (however spirited) have proved to be painful traps for the bovine beauties. Is that trepidation still warranted or is that fear, in and of itself, cause for optimism?

The reality is that YOU must make that decision and execute financial judgment in a manner consistent with those views. While everyone seems to have a thought on how this year will end, the truth is that nobody knows (for sure). My humble opinion is that a top will be put in this summer but, with that said, I'll be the first to tell you that the script has yet to be written. Further, if we're to focus on the journey (rather than the destination), we must remain adaptive as we find our way.

With the S&P 950 and NDX 1150 trendlines acting as downside support (and Friday's reversal highs providing resistance), we've got a technical framework with which to trade. We must now factor in the collective psychology (lotsa anxious bulls), fundamentals (it's preannouncement season) and the structural metric to craft a cohesive strategy.

Today's tells include FRE (FNM), the semicaps (Monty downgraded), the breadth (been money), the brokers, the biotechs, retail, our levels and Fokker (snort alert). It's been a while since we've had a coupla down days in a row and, until that happens, the collective complacency will continue. The path of maximum frustration into month end? Down a little bit more, a rally attempt higher (as everyone climbs aboard the "mark up" express) and then lower to end the quarter? There's obviously no way to know (without the benefit of hindsight) but as I'm thinkin' it, you're gonna read it.

Finally, I had dinner last night with a couple of "old" friends that I haven't seen in a while. As we caught up with each other's lives, I was reminded of how easy it is to get stuck in the muck. This profession can be all-consuming and if we don't make a conscious effort to balance, we're liable to fritter away our precious time. Do what you gotta do but, more importantly, be who ya gotta be. It's why we're here and it's why you're you.

Good luck today.
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