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Hunger Strike!

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The quiet riot may end my diet!

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The wheel is turning and you can't slow down,
You can't let go and you can't hold on,
You can't go back and you can't stand still,
If the thunder don't get you then the lightning will.


(Grateful Dead)


Good morning and welcome back to the yawning. The summer is gone and traders are back but it's been rather thin at the minxy race track. Despite the new slew of things going on, the critters are thin and their faces are drawn. "It's been a long time since I chowed on a steak," said Boo to his good friend Sammy the Snake, "If I don't eat soon, I'll make a mistake and my poor tired bones are liable to break!" Will it come to that--a bear with no fat?--or can Boo's motley crew show up for combat? A new week is here so brush off those skills as we ready anew for a romp through the 'Ville!

We power up this minxy pup for what promises to be a rather intense week. With Elmer taking center stage, brokerage earnings coming of age and the election betting all the rage, the "three E's" are sure to shake up the mojo. And we know how sensitive this technical juncture is--we're extended, tickling the top of a few (downward sloping) trend channels and testing multiple inflection points (Russell, XBD, cyclicals, S&P). It will be a defining five sessions and with the third quarter bearing down, alotta folks will be reading the cue cards.

Will there be an upside phase before the longer-term malaise? That's the question I'm wrestling with as we edge forward through the muck. Admittedly, the "big picture" is much easier for me to see than the near-term nuances. I have little doubt that the metals will be the currency of the future, energy will outperform tech/financials, aggregate multiples will be single digit midgets and bubbles will burst in housing, debt, psychology and (potentially) derivatives. But as traders, the journey has always been more important than the destination and profitability will be a function of our navigation skills.

I handicapped the potential scenarios last week and see little reason to change that vibe. If the fundamental metric stumbles--either as a function of the financials, tech warnings or both--and Elmer sports his hiking boots (as expected), the psychology will have to make a choice. Either the beta chase will pick up in pace (as performance anxiety kicks in) or a sad reality will emerge as we try to see over the edge of Pandora's Box.

The stress test should begin this morning. Citigroup (C:NYSE) was booted by Mother Merrill, PMC-Sierra (PMCS:NASD) puked up its breakfast and Unilever (UN:NYSE)--and Colgate (CL:NYSE)--cast a cloud on the consumers. To make matters a bit slicker, crude is trading at four-week highs after Yukos halted shipments to China's biggest oil company, the first time a tax dispute has disrupted exports from Russia (the world's largest oil producer). That has the pre-market futes a bit blue--or red, as the case may be--and has set a tough tone to start the week.

S&P 11113ish-S&P 1130ish remains the range to keep an eye on as we edge into this morning's muck. Jason Goepfert pointed out an interesting little factoid on today's Buzz that bears repeating. The S&P 500 has closed negatively for the week after September expiration seven of the last nine times. The only two positive occurrences were in 1998 (recovering from the August "crash") and 2001 (recovering from the 9/11 tragedy). Taking out those two instances, the average return for the S&P during this week has been nearly -2%.

Thanks Jason--and good luck as we dance and duck.

R.P.

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