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Let's Get Ready to Rumble!

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Levels are broken but we've now sold off nicely INTO the meat of earnings season.

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Good morning and welcome back to the Minyan track. As traders slowly return from vacation, we ready ourselves for a new minxy fray. Last week was a nibble, a small bite-sized snack of the type of headwinds that are sure to be back. "With Earnings, elections and Elmer front stage," mused Sammy the snake (the resident sage), "we gotta prepare for the war that will wage as the bulls and the bears get set to engage." Will the screwy Boo crew chew through the bull view, or are Hoofy's heroes now way overdue? It's a spankin' new week in the critter boutique so let's dig in our heels and wrassle this freak!

The question on everyone's mind is whether last week's leak was an aberration or a precursor of further curses. With software earning its name and the retail flail tippin' the scale, a collective "uhh..." has started to resonate in Matador City. The uncertainty on the Beltway--be it Senate intelligence or electoral infighting--isn't helping matters, nor has the bold bid that reemerged in the rude crude. Thus, as investors tee it up on the back nine, they're starting to pay closer attention to the sand traps that litter the fairway.

Some clarity will likely emerge this week after we hear from Novellus (NVLS:NASD) today, Intel (INTC:NASD), Merrill (MER:NYSE) and Johnny John (JNJ:NYSE) tomorrow, Bank of America (BAC:NYSE) and Apple (AAPL:NASD) during the hump and Citigroup (C:NYSE) and Big Blue (IBM:NYSE) Thursday. To add icing to the cake, Beeks will deliver a spate of economic earnings (later this week) that will help craft the collective outlook. If indications of a slowing economy overlap with further proof of inflationary pressures, the lopsided (bullish) sentiment and long standing complacency will be put to the test.

Please note our field position as we edge into this avalanche of information. With the recent slippage and bovine clippage, a few indicators are starting to feel "heelsy." Those short-term guides may help traders embrace positive news should corporate America stand up and beat their chest. Remember, good news (that's not great) is often sold in extended tapes while bad news (that isn't horrid) can lead to a rally if the reactive crowd is looking left. This notion will be put to the test as several semiconductor bellwethers report and address the inventory issues that have plagued them all year (SOX -11% ytd)

While we'll soon get a better feeling for the fundies and have circled a slew of technical inflection points, the structural metric remains the wild card in my opinion. The Minx has been in an 8% range (S&P 1080-1160) all year and, in addition to increasing membership in the hair club for traders, it has conditioned the masses to buy dips and sell blips. I believe that Carrie will be the ultimate determinant of which side we eventually ride, and the bulls are desperately hoping that rolling corrections (like we saw throughout '03) will allow the largesse to finesse as a function of time rather than price.

We power up this Monday pup to find the tricky Nikkei higher (election), Europe pink (slightly red), the dollar and metals flattish and our stateside futes slightly off (Merrill downgraded the global chip sector). With the Street sportin' a full line-up and the meat of the earnings order coming to the plate, this is gonna be an important (and potentially volatile week) that'll test the will of the bulls with a spate of supply.

The Minx sans stimuli is starting to feel more and more like a bicycle with its training wheels removed. The ability of further progress will be a delicate balance (and a bit wobbly) as we find our way. Choke up on your bat, if need be, and remember that hitting for average is a lot smarter than swinging for the fences.

Good luck today.


R.P.

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