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Twisted Sister


This NASDAQ trendline is my best shot at squeezing the newbie shorts!

Good morning and welcome back to the days of our Minx. When we last left you, the flickering ticks were bickering quick on their way through the '04 abyss. Straw after straw, the camels in Minyanville were complaining of back pain as pressures were mounting on the sell side. Jobs data...blah cap kickers Cisco (CSCO:NASD) and Hewlett (HPQ:NYSE) seems so easy on the sell side that most bears still don't believe it!

The internals have told the story as most lifts were light volume and lesser heart. And while the semis are finally feeling the diaper effect (bullish), the rest of the tape seemingly wants to play ketchup. Scary indeed, considering the Olympics are upon us and the electoral uncertainty will offer cause for paws. Toss in the specter of back-end loaded September tech quarters and our field position suddenly seems less oversold.

The bulls have a few things going for them. An ever-optimistic Dell (DELL:NASD) almost giggled on their conference call last night. They almost mocked the bears by saying that they "never saw the slowdown" and were "surprised by the comments by other tech companies." Couple that with some newbie cubs and a NASDAQ Comp that's sitting on the trendline from the cycle low (October 2002) and you have a recipe for major snappage.

That's apropos in many ways as the broader tape (S&P) has traded just good enough to plant the seed of hope. When you think of how many times the dip shtick sticked (say that ten times fast), there is a recipe for a lot of higher inventory. There is an inflection point when the average cost of the aggregate market flips, and that has profound effects on the collective psychology. For the broader cycle, that level is much higher in many cases. During the 2003 punch (bowl) drunk love, a lot more money was sucked back into the fray.

The final straw, in my opinion, will come when the mindset of the masses settles on the fact that Elmer's great experiment isn't going to work. Negative real interest rates and historic stimuli are a Band-Aid on a broken bone. The stakes are much higher these days as the dependence on home equity and the leverage (at all levels) are potentially toxic risks. All of this against the backdrop of a weak and weaker greenback that has a date with devaluation. I don't claim to have an answer--I don't know that there is one--but it ain't gonna be pretty.

What to do? Remain prudent and patient. We're in the midst of a prolonged and painful weed out, and advantageous opportunities are fewer and farther between. Just remember that 8000 hedgies, multitudes of mutual funds and countless cowboys are standing in a circle shooting at each other. Sometimes it's better to leave the gun on the table and wait for the smoke to clear. It may take a while, but perseverance and consistence will prove to be our greatest allies.

Good luck today.

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