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The Phonebook Follies




"I don't care about losing all the money. It's losing all the stuff."

--Marie Kimble, The Jerk

Freaky Friday is well underway as the critters all search for a way to get paid. While we've got bulls to the left of us and ursine to the right, a slew of alligators arrived on the scene this morning to rotate some of their recent fixed income gains to the equity fray. That helped to prop up the Minx (in spite of neutral breadth) but hasn't been able to push the tape through the nearest-term resistance at S&P 1130ish. That's the battle du jour and the level to watch as we wade through the September expiration.

The mood on the Street remains hopeful as we edge towards quarter-end. In fact, the mainstream consensus is that we'll soon catch a nice bid, ride the electoral clarity through November and performance anxiety will then dominate the markets through the rest of 2004. I've said it before and I'll say it again--nothing will surprise me anymore as it relates to the collective agenda or the power of perception. Still, I've never been very good at jumping on the bandwagon (which is why I underperform during momentum driven markets) and have doubts as to the sustainability of the lift.

To be sure, the action in the trannies, cyclicals and small caps bode well for the bulls. Further, there hasn't been motivated selling in quite some time and it may take a "shock" to shake the tree. But with the Matador Express getting crowded and volatility reaching Bar Mitzvah proportions, I've defined my risk and will play the hand we've been dealt as effectively as possible. That may mean that I miss an opportunity but if I'm gonna lose money, it's because I'm wrong rather than because I've climbed on board someone else's trade.

Away from today's equity fray, crude is up a deuce, the dollar is mildly green, the metals are migrating near session lows and fixed income is off (allocation). We've been doing some deductive reasoning regarding the level of rates and its implications and I, for one, believe that it's pointing towards a more prolonged soft "patch." That remains the key to the Red Dye vault, in my view--when folks realize that growth is slowing and Elmer is hiking rates, it'll sound an alarm in alotta circles.

As for the rest of this session, watch the breadth (not confirming the upside), the beta chase (for slippage/further traction), S&P 1130ish (stops above), the financials (relatively heavy) and Cisco (CSCO:NASD)/Texan (TXN:NYSE) (tech proxies). All the while, understand that the combination of expiration, allocation and the S&P re-weighting is clouding the price action. I'm not sure that tri-fecta is gameable but we clearly must respect that these forces are in motion.

As always, I hope this finds you well.

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