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Shadow Boxing


Those aren't birds, baby--they're storm clouds!


Blue, blue windows behind the stars
Yellow moon on the rise
Big birds flying across the sky
Throwing shadows on our eyes

(Neil Young)

Good morning and welcome back to the sweltering shack. August is here and it's hot as can be as the critters get set for a fresh jubilee. July was quite noice for the bulls in the hood who stepped up and bought when the gettin' was good. "I'll take 4% every month on the clock," said Hoofy the bull to the other livestock, "Boo is expecting another bear shock but he's missing the train of profits unlocked!" Will the Matador Crowd step up and stand proud or is it time to sell now that they're getting loud? We'll know soon enough as we sift through the jitters and ready anew for a dance with the critters.

As price is the ultimate arbiter of the "what matters now" crowd, the bulls have grown increasingly confident as we shake the sand from our shorts. With all the puffing and posturing, however, it's easy to forget that the mainstay averages are on either side of the 2005 flat line. Yes, we're trading at multiyear and, in some cases, all-time highs (in a slew of sectors) while acne reigns supreme. That's been the clear focus and it will likely remain so as long as our screens are green.

I learned a long time ago not to rationalize risk as we're all just pawns in a much grander scheme. Still, while bantering on Friday's buzz, I openly wondered if technical affirmation was necessary for maximum frustration. This morning's Wall Street Journal highlighted this development by quoting several market mavens who opined that "we can't find any weakness" and "if we're erring, it's by not being bullish enough." Perhaps, but if the mercury doesn't continue higher in August, the potential for trapped longs is a notable caveat.

To be sure--and to be fair--dips have been shallow and rolling rotations have replaced outright migration. And, as long as we're seeing both sides, I suppose that the lethargy in the financials (coupled with the jig in the energy patch) could very well be the manifestation of our long-held belief (that energy will overtake financials as the top weighting in the S&P). I still have trouble seeing the tape rally without their top dawg and will keep BKX 100 on my radar to start this fresh five.

I picked up a fair spate of performance anxiety on Friday as traders anticipated fresh monthly flows today. That raises the ante on today's session but isn't necessarily a precursor for the month. With leadership narrowing, the piggies punk and new era bellwether Google acting like a pup in heat, there are clearly flies in the ointment. It remains to be seen if the lopsided lean will again cause a sting but, for my part, I'm making sure that my risk is defined and my discipline is constant.

We power up this August pup to find flattish global markets, higher crude (on the heels of King Faud's death), a sluggish dollar and firming gold. Over the weekend, while working on my Ojai shpiel, I carefully weighed some big picture thoughts. One of the elements that came into focus was the relative attractiveness of the metals (silver). That's clearly a longer-term vibe and it's important to synch your time horizon and risk profile in a way that allows you to see a trade (investment) through to fruition.

Finally, and as many of you know, we're a few short weeks away from the aforementioned Minyans in the Mountains financial retreat. Those sunning their buns last week missed the announcement that Tom DeMark will be joining us in Ojai to give his first public presentation in over 18 months. We're excited to welcome him to our world and I know that many of my fellow professors look forward to some quality vibe time. There are still spots available but fair warning, Minyans, the remaining rooms are lifting fast.

Good luck today.

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