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Line Dance

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The mechanics of the swing are more important than the results of the at bat.

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There's battle lines being drawn
Nobody's right if everybody's wrong
Young people speaking their minds
Getting so much resistance from behind


(Stephen Stills)



Good morning and welcome back to the old school track. Snapper arrived on the Street a day late and rewarded the bulls who were willing to wait. They took 'em up early and then chopped around and finally settled on higher ground. "I knew that the flows were ready to spurt," said Hoofy the bull from the concert, "A few more of these and we'll surely convert the frustrated bears who are covered in dirt." Can Boo turn the tide and trigger a slide or will his furry try again be denied? We'll know soon enough as we hike up the Hump and tickle a tape that's pleasantly plump!

It was an active day in the city of critters yesterday as Boo brushed off the bear suit and delivered it to my desk. After the initial flurry took the tape higher, I slipped two legs in the fur (50% conviction on the short side) despite snazzy internals and strength in the semis. While I sensed that turnaround Tuesday may have been in the cards, the Minx spent the rest of the session in a slow and lazy slither. We closed firm but not fantastic as the critters sat on either side of the battle lines and duked it out.

The effort was predicated on a few inputs, most notably an ability to define risk and remove emotion. S&P 1250ish is on alotta radars as it's a Fibonacci target sitting directly above. You may or may not believe in this mathematical mojo but it really doesn't matter. If enough folks are following it, there's a decent chance that perception will dictate our minxy reality. As I factored in the (overbought) stochastics and noted the lopsided lean (as a function of technical affirmation), I set my stop a bit above and went schnitzelin'.

While we know that the toughest fades are typically the most rewarding, hindsight will be harsh if we continue our march. It's hard to find fault with alotta these charts as money continues to migrate into the market. Further, as we've witnessed rolling rotations rather than outright migrations, any and all pullbacks have been Shallow Hal. A smart man once said that you shouldn't short charts that you can't ski and, truth be told, alotta traders still seem to be on the lift.

Of particular note has been the strength in the energy patch and lethargy in the financials. Old school Minyans know that one of my longest and firmest held beliefs has been that the former overtakes the latter as top dawg in the S&P. I have little doubt that we're seeing that unfold although questions remain on what that means for the tape. I default to the fact that, in a finance based economy, the keys to the vault will remain in the banks.

We power up this Hump Day pup to find dollar squalor (-80 bips and through July support), firm metals (I think the XAU has a date with 95), pink bourses and rude crude (breaking out again). All of this points to further jig in the CRB (commodities) which again begs the question of whether the rising tide will lift equities or squeeze margins. I offered yesterday that the answer was "yes" but that's a bigger question in a broader landscape. For purposes of today's tape, we're gonna put one foot in front of the other and chew through the dew together.

Good luck today.


R.P.
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