Fare ye well into the bell!
She cuts you once, she cuts you twice
But still you believe
The wound is so fresh you can taste the blood
But you don't have strength to leave
Elmer swings by for an afternoon sigh and the Minx is now testing the most recent highs. His course of action was no shocker to market observers as his pace remained measured. Now, with the third step in the rear-view and the fourth quarter bearing down, fund managers are schvitzing a bit. Do they get on the train (lest they miss the upside) or fade this move (and take the other side of the herd mentality). Things that make you go....OY!
Hoofy will argue that the all-time high in the trannies, ability to shake off the fundamental lethargy and newfound traction in the brokers are givin' the green light. Boo will counter that the industrials haven't confirmed, more pre-announcements are coming and the widespread complacency is eye-popping (the VXO has a 12-handle!). We've discussed both sides but I'll again offer that emotions are in control and dictating the actions of fund managers. And if everyone is reaching for exposure, we must discern if where the path of maximum frustration lies.
Away from the equity fray, the dollar continues to come under pressure as money rotates to an alternative currency (metals). The DXY failed anew at resistance (DXY 90) and has instead focused its attention on downside support (DXY 87). I'm a long-term dollar bear (the printing press has caused a mess) but got more constructive in the near-term a few weeks ago. Whether that view is correct remains to be seen but I have more confidence in the big picture vibe than the more muddled near-term.
The earnings train continues to chug as Bear (BSC:NYSE), Mother Morgan (MWD:NYSE) and Federal Express (FDX:NYSE) report tomorrow morning. And while it's tough to game invisible catalysts, I sense that we'll see some more pre-announcements in the tech space as the back-end loaded quarters aren't measuring up. Whether or not that'll matter in a frantic environment remains to be seen but I would be remiss if I didn't mention the potential for them to hit.
As I pen this column, the S's are trying to poke through S&P 1130 as the N's test the 200-day at 1440. Further, the brokers are testing resistance at XBD 130 and that's gotta be on our radar. Again, I would assign a 25% probability to outright rampage and have factored that probability into my risk profile. I don't trust the tape but I've learned to respect the power of perception. There are alotta funds trying to make their year in the next few weeks. That's been a recipe for disaster in the past but can be painful for the bears in the interim.
Fare ye well into the bell.
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