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Seed Vs. Greed


Call me Farmer Fred!


Good morning and welcome back to the raised eyebrow. Yesterday's thumpin' got the bears jumpin' and begged the question of ursine obsession. Will the scales finally tip towards a south side trip or will Hoofy regain his once firm grip? The seed has been planted for all those enchanted so let's dive on in and take nothing for granted!

Trading, in its purest form, is identifying the disconnect between perception and reality. During the spring fling, the perception was that geopolitical risk and global unease would continue to weigh on equities. The reality, as it turns out, was that Elmer & Co. flooded the markets with an ocean of liquidity and the rising tide eventually lifted all boats.

Turning our screens upside down, we find a mirror image of the line of scrimmage. Optimism abounds, as strange as it sounds, and the bulls have the ball while the bears are now clowns. The floppy shoes aren't new for our friend Boo and after three years of gains, he's gotten his due. Our task at hand, from where I now stand, is to weigh the supply against the demand.

Will this recent bleed plant a seed or will the worries fade and turn to greed? Please note that the overseas markets have left quite an impression the last three sessions. Japan has been smacked for 6% while the German DAX has taken 8% worth of lumps. To put that in perspective, the S&P would take a 80 handle hit (from Friday's close) if we Deutsche marked. That would put the Minx back at S&P 950 and, for all intents and purposes, sack the quarterback into quarter's end.

We touched on a touchy topic yesterday regarding the "intangible backdrop" and the disconnect between the current (recent?) giddiness and the confidence in the administration. Sure enough, the top story on my morning Bloomie was that Dubya's approval rating has fallen to its lowest level of his tenure. Why do I feel that this is important? By my estimation, we're edging through four bubbles (psychology, housing, debt and derivatives) and they're likely intertwined at some level. If confidence starts to erode, it will ripple and trickle through the fearsome foursome. It may not be today's business but it's something to ponder as we continue our wander.

We power up this morning's madness to find firmer gold (eyeballing $400), higher oil (although well below $30), a flat dollar and marginally higher futes. I would think that a morning rally would fizzle (or at least test the downside) as traders generally like to probe the direction of the previous day's outsized move. Still, we must respect our tells (both ways) as they've served us in good stead. Pay particular attention to the brokers, biotechs, breadth and banks and watch S&P 1010 as the nearest term support. And think positive, cookie--everything happens for a reason.

Good luck today.

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