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Slithering with Sammy


So there I was walking through the Minyanville pasture and all of a sudden I jumped back...

Tony: Hey Sammy, almost didn't see you there. How goes it?

Sammy: How goes it you goes great. The market goes up, becomes overbought and can't get through resistance. Then it goes down, gets oversold yet doesn't break support. What could be better for me?

Tony: Yeah, hasn't this been the most incredible trading range in years?

Sammy: I don't remember when I had it so good. I guess it would have been the last time there was an economic and financial market transition period.

Tony: It sure seems like it to me. It all fits with the "good enough" quarter concept. The rate of improvement in the economy seems "good enough" to hold the market around current levels, but is not "good enough" to generate the next leg higher.

Boo: BOO (get it?)

Tony: Awwwww Boo, you scared the heck out of me...

Boo: If that scared you, wait until the market breaks down from that narrow trading range because this year is no different than other head fakes during the...uh, pardon the pun...bear market. When people notice that, you will really need to catch your breadth.

Hoofy (also sneaking up from behind): Boo my brother, you have to admit, the fundamentals are getting better, earnings are beginning to get revised higher and the technical action isn't that bad.

Boo: What? Not that bad...even the most liquid stocks are beginning to trade by appointment.

Hoofy: Sammy, isn't that what is supposed to happen during periods of consolidation after a major move higher?

Tony: That would be textbook stuff, but if it were that easy, everyone would be making a fortune off it, which they are not. What really characterizes a trading range is when it feels like a breakout is imminent when you reach the upper end of the range and it seems like the tape is about to collapse at the lower end of the range. Basically, it feels so real that the buy/sell decisions aren't so easy. It is when it becomes soooo obvious that we are getting close to moving out.

Snapper: I would love to play right now, but the problem I have is that everyone is on vacation and doesn't want to play near the pond.

Tony: I love ya pal, but I don't buy that. I have a blackberry, a laptop with wireless networking and a cell phone (believe me, I know I have issues). Basically, that means I can be anywhere and have it feel like the office. If something is happening my blackberry will beep, my cell phone will ring and I will read an email while discussing it with my right arm Mike. Sure, things can be slow during this time of year, but to think everyone is on vacation and not paying attention seems too cliché to me.

Sammy: So you are saying that the lack of volume or interest has at least something to do with this "good enough" scenario of yours?

Tony: Yep, and the problem is that there is no telling how long the "good enough" scenario can last. Truth be told, over coming weeks this tight trading range should be broken one way or another. Rather than trying to predict the direction of the break from the range, I would rather wait and react to the move. Frankly, you all know my intermediate-term view, but I could jump into any of your skins right this very second. That means the action is edgeless and as a everyone else emailing in from blackberries on vacation, I guess I will wait and watch.
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No positions in stocks mentioned.
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