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Blackout Cake


I FEEL like a manhole sometimes!


Good morning and welcome back to Flickering Ticks, USA. We ready anew for the Wall Street parade as we roll up our sleeves and get set to trade. The tape has been dull for almost three weeks, devoid of the usual valleys and peaks. "I like what I see," said Hoofy the bull, peering on out from under the wool, "in sixteen short days, the quarter is full and a press for return could create upside pull." Will our various screens soon be dancing in green or can Boo and his crew flip over the scene? It's tricky, it's Tuesday, it's sure gonna thrill so suck down that joe and let's roll through the 'Ville.

It was an interesting evening for yours truly as my usual process was unavoidably altered. It started out normal enough-post-close conference calls, a few meetings and a quick jaunt to the gym to work out and sneak in a ing)" target=_blank>schvitz. Even the short sushi respite that followed was par for the course as seeing old friends is always good for the soul. It wasn't until I turned the corner onto 57th Street that I knew something was amiss. Fire trucks everywhere, the putrid smell of smoke and alotta confused residents wandering aimlessly.

I walked up to the first familiar face I knew-Brian, the manager at Mr. Chow-and asked him why the lights were off and his customers were herding in front of his now dark digs. "Underground electrical fire," he said, "one by one, all the manhole covers exploded into the air and knocked out the power." I thanked him for the information and headed next door to my apartment building. "We're lucky," my doorman Junior told me, "everyone else lost power but all we lost was cable." I breathed a deep sigh of relief, knowing that I had hours of work in front of me, and went upstairs to my home office.

And then it hit me. I have a cable modem.

So there I was-no television, no computer, no internet access and two very hungry cats. I typically scribe some market vibes the night before the next trading day but, as the tape has been slithering sideways and data points loomed on the horizon, I knew there wasn't a whole heckuva lot to add. On the one hand, we had Hoofy patiently waiting for the overbought condition to be alleviated as a function of time. He's been quietly reading the Horse and Depew and, between them, was confident that we remain in rally mode. On the other paw, Boo is quite conscious of the uber-thin short base, low Red Dye readings (20.9%) and the lopsided lean that was evolving. He knew that these elements weren't a causation of pain but they could flip a meaty downside switch if a catalyst occurred.

I arrived at MVHQ a bit early today and attempted to chew through the stew that makes our minxy meal what it is. Lehman Brothers (LEH) reported earnings and, at first blush, it didn't seem like enough. Margins were lower across the board and while that isn't a shocker for those of us who live in the ticks (a comment on the environment, not on Lehman specifically), it'll be interesting to see how the Street greets the news. The "bull case" for the brokers is one of liquidity and capital markets. The bear case is margin compression, overcapacity and structural smoke. I fall squarely in the latter camp although I'm conscious that timing dictates the disconnect between perception and reality.

Of note, as well, is the PPI which came in much weaker than expected (-.6% vs. -.2%). Given the pullback in commodity prices, this isn't the biggest shocker of all-time although it'll likely confuse more than a few economists. I continue to feel that we're toggling between stagflation and deflation as our fearless Fed tries different mixes of minxy ingredients. That window-and that very confusion-will likely placate the bulls and their upside agenda. When it becomes readily apparent that we're stuck between the rock and a hard place, that's when the psychology bubble will deflate and, with it, the fortunes of the tape.

First things first, we've got a tape to trade and I'm falling a bit behind while getting a little ahead of myself. Keep an eye on those frisky financials (on the heels of Lehman and in front of their brethren), the retailers (Best Buy (BBY) is trading up $3 on earnings), the trannies (which, along with the BKX, remains below the 200-day), market breadth (single best intraday tell), beta (semis and nets) and, of course, President Fish. It is, after all, his birthday today and Daisy has some silk milk up her sleeves.

Good luck today.


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