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The Hump Day Shuffle


The technicals are bent but the levels unbroken.


Love lost, such a cost,
Give me things that don't get lost.
Like a coin that won't get tossed
Rolling home to you

(Neil Young)

Good morning and welcome back to the critter pack. Yesterday's snoozer was another bear bruiser in what has become a green bovine cruiser. "After the sprint that started this week," Boo said to his friends as he rubbed his red cheeks, "I woulda thought that Elmer's critique would open the door for a quick downside leak!" Can the clan from Red Dye stand their ground and defy or will the mad cows leave them with a black eye? It's Hump Day my friends so brush off those skills as we ready ourselves for a jog through the 'Ville.

The ducks are quackin' these days in Matador City as the bear scare has lost some glare. It seems like forever and a day since crude was trading with a four-handle, the charts were broken and Hoofy was chewin' on a crow (nice visual!). Just as the bears let out a collective breath, however, Elmer--wry grin and all--let the dogs out and caught the Street lookin' the wrong way. Now, with oil spoiled (-13% from high), the technicals doing an about face and the action finding traction, it's gut check time for the furry ursine.

While the Tuesday yawner was unremarkable in many ways, the VXO (volatility) index was screaming for attention. The widely accepted fear proxy slipped to eight year lows and settled at levels unseen since February 1996. There are two ways to interpret this--either this index technically "broke" (inferring higher stock prices in the near-term) or a tradable disconnect between perception and reality has occurred. Perhaps it's both--I'm not sure--but I feel fairly comfortable accumulating "out month" paper and locking in these premiums. In other words, I'm of the view that the Minx will vacillate with more vigor than the market is currently pricing in.

A quick sniff of our primary metrics finds us wigglin' slightly above our much discussed technical levels (S&P 1140, Nazz 2015, BKX 98, SOX 487), structurally "sound" (although potentially vulnerable in the uber-short term), fundamentally quiet (we'll soon focus on the upcoming earnings) and psychologically complacent (see above). It's been uber-thin these last few weeks and the volume has been non-existent. That'll be attributed to seasonal factors if we rally, but pointed to as an "obvious" tell if the lightish lift fails to deliver. Please see both sides.

We power up this Hump Day pup to find Asia and Europe cat nappin', the dollar making some greenback (still under the 200-day) and the metals drifting lower anew. The weekly mojo was shakin' a bit (in front of the 'sudden' three day weekend) and, as such, we'll be trading three days worth of information (and premium) in the next two sessions. That'll include the "net" PPI tomorrow at 3pm (joy!) and should make for an interesting final hour of the shortened string.

Good luck today.



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