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The Monday Morning Muse


Watch your tells and watch your back!


Good morning and welcome back to the shivering shack. With last week's grind fresh on our mind, it's time to find out how much we're maligned. The bovine will tell ya it's now time to bounce but that laissez faire 'tude will cause some to pounce. "Keep picking away in front of the snap," Boo offered as he set the bull trap, "the sleepy slow summer has caused you to nap and that's just what I need for a big ursine slap!" Can the Red Dye soiree finally come out to play, or will Hoofy delay the crimson display? It's minxy with moxie, it's sure to fulfill, so settle in noice for our romp in the 'Ville!

After six straight weeks of driveling drip, the bulls now need a grasp on their grip. Such are the ramifications of our latest flirtation with the bottom end of the '04 range. The consensus, as measured by the collective complacency, is uniform in their belief that this is the year of digestion. That the latest lethargy, scary as it may seem, is a healthy and necessary precursor to the next leg of the mighty bull. That's their bet and they're stacking their chips on the blue chip dip.

The bears, for their part, are betting that the big picture blues have finally arrived. They've been steadily shaken by the constant charm of the active agenda but are resolute that the fuse has been lit. With the historic stimuli drying up and the weight of their words withering, they opine that the Fed is trapped. And while they know that caged animals are dangerous and desperate, this particular beast is clearly long in the tooth.

With earnings coming in decent (not great) and the major indices pecking anew at the lows, traders are faced with some serious choices. I'm resolute in my belief that lower levels are an eventual function of time but will weigh two divergences as we ready for the new sting of sessions. The VXO (volatility index) is over 20% lower than it was the last time we were at these levels. That tells me that folks are complacent and bodes well for a Red Dye fry. Conversely, the BKX is 4% higher than the same go 'round and, as the piggies are the belle of the ball, we must pay particular attention for signs of financial leadership.

The spate of mergers is a shot in the bovine arm and may offer light at the end of the psychological tunnel. They'll look to embrace that fact and use it as a launching pad for a three step process. First, they'll need strong breadth and leadership from tech and financials. Second, they'll want to see volume as a directional qualifier. Finally, they'll seek the technical turning point that will arrive if they can hold current levels and start back up the track. Do that, they figure, and the reactive masses will shift their perspective from breakdown city to the prospect of inverse dandruff.

We power up this Monday pup to find a flattish Asia, slightly pink Europe, some give back by the greenback (still above DXY 88) and groping traction in the metals. I would also like to call your attention to an interesting article on page C1 of the Wall Street Journal titled Foreigners seem to be souring on US assets. This has been a caveat repeatedly offered by Professor Succo and it is worthy reading for Minyans in our midst.

Finally, and before we stray into the fray, I wanted to remind ye faithful that there are only four weeks remaining until our first annual Minyans in the Mountains Colorado retreat. The Minyanville mission has always been to build a strong, smart network of people who share a common goal and vision. This will be our first official gathering and I sincerely hope that you'll join the growing contingent who will be sharing our vibe.

Good luck today.


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