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The Tao of the Tape


"He who seeks titles invites his own downfall."


"To know you have enough is to be rich."

-Lao Tzu, "Tao te Ching"

Good morning and welcome back to the flickering fray. There's a lot going on and we're all in a rush so let's paint the tape with a Minyanville brush.

There seems to be an abundance of angst on the Street as frustration and compression mesh into a newfound existence. While I've seen this long, hard road coming for quite some time, it offers little solace to those in the throws of the struggle. Opportunities surely exist but performance has migrated from the mainstay averages to select sector bets. In time, the selection process will further refine as single stocks emerge as the vehicle of differentiation.

While easy money is flowing into the market, few folks are finding it on the Street. The resulting stress is manifesting in both psychology and in the price action, creating a delicate fabric where pressure points abound. We've discussed this evolving dynamic but it'll remain unspoken in most circles for as long as the screens are green. My sense is that the autumn wind may deliver a biting chill that awakes us from the sleepy summer slumber and forces us to face some difficult issues.

We mapped out both sides of the critter ride yesterday and heard the word from both Hoofy and Boo. Those dynamics remain largely in play with a few added elements. Best Buy (BBY) blew and got tagged for 11%. The breadth was nosty from bell to bell. The banks continue to struggle with distributive supply. And as we migrate under the late summer highs, the notion of a "double top" in both the S&P and NDX is starting to gain credence.

We know the bull case-rates are low, spreads are tight, performance anxiety abounds and the helping hand of liquidity awaits each and every dip. Still, this latest lift has alleviated the previously coiled condition while taking us to the underbelly of staunch resistance. In the process, hedgies have pressed their upside bets with hopes of triggering a long squeeze. That's the recipe for yellow flags if the lopsided lean doesn't gain some steam.

August was a tough month on the fundamental front although alotta folks seem to think that Katrina will serve as reactive rationalization. If the Best Buy action was indicative of investor patience, however, the fuse may be shorter than most folks think. With expiration a few days away and quarter-end agendas in full force, the path of maximum frustration is about to emerge. Stay on your disciplined toes, Minyans, as the games are set to begin.

Good luck today.

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