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Monday Morning Quarterback: What's Shakin', Bacon?


The banks pour some fat into the fire.


"You should never try to teach a pig to read for two reasons. First, it's impossible and secondly, it annoys the hell out of the pig." --Will Rogers

One of the first things I learned on Wall Street was to never let an opinion get in the way of making money. It's an agnostic perspective that served me in good stead over the years.

We can debate the merits of the current rally until we're blue in the face but the bottom line is measured in green and red. Indeed, a few months ago, when discussing a monster move that could take the tape to S&P 1000 by the spring-and yes, it was early-most folks were curled up in a fetal position. Now, following the sharpest bear market rally in history, many of those same people are doing a jig.

To be clear and consistent,
I have confidence that what we're witnessing is nothing more than a massive stock tease. We monitored the cumulative imbalances as they built through the years and it would be myopic to assume we've swallowed the bitter pill in its entirety. While there is another side to this Wishbone World-one we must respect-social mood and risk appetites shape financial markets.

I don't know how "things" are where you live but through my lens, times are tough and tensions are elevated. While news is always worst at the bottom (and best at the top), the finance-based global economy is dependent on employment, savings and, while amorphous, trust. One way or another, the bar bill of our collective excess must be paid, by this generation or the next.

Be that as it may, the big picture is comprised of many smaller ones and the destination we arrive at pales in comparison to the path we take to get there. We've been keying off the financials in that regard, having flagged the (bullish) reverse dandruff above BKX 32.5. If "as goes the piggies, so goes the smoke" is to again play through, S&P 875 is the level of lore for those keeping score.

Technical analysis is a better context than catalyst but it allows for defined risk when trading the tape. Should Hoofy mount this particular hump, it will open the door for a measured move towards double secret resistance (the 200-day moving average the downtrend line from May 2008) in and around S&P 975 (with intermittent resistance at S&P 890-900).

So it's said and always honest, my best guess is that regardless of this next leg, Boo has some unfinished business to the downside, quite possibly back towards multi-year lows. If and when that comeuppance arrives-Sell in May and Go Away?-it should set the stage for the second 20%+ rally of 2009 later this year. Again, one step at a time but mis ojos son tus ojos as we see both sides.

The bogey on the radar is the stress tests for the banks, coming to a screen near you on May 4th. While it's clear there are holes in the financial fabric, the question we must weigh is whether traders cautiously position in front of that report or if the animal spirits are stirred to the point where they'll wait for news before lighting the fuse.

One thing is for certain; given the technical juncture, corporate releases, DC comics and the reactive nature of market participants, we best be set for a freaky fret in the following few weeks.

Discipline over conviction as we find our way.

Random Thoughts:

  • Dare to dream. You never know!

  • So, Oracle (ORCL) steps to the plate and gobbles up SunMicro (JAVA) in a deal valued at $7.4 billion. We've been carefully monitoring the re-emergence of M&A as, on the margin, it's constructive through a psychological lens. Yes, SunMicro was desperate but the fact that it found a buyer speaks to an underlying layer of demand.

  • While in Orlando on Friday, Professor Tom Fant asked if I would buy gold into the 200-day moving average. I noted the defined (negative) dandruff for the yellow metal and offered that if that breaks, it would set up nice and tight defined risk for Boo (with the 200-day serving as a backstop).

  • Of course, where you stand is a function of where you sit and longer-term folks could view weakness as an advantageous entry point. I simply sense we'll see gold trade with a six-handle before the devil of deflation goes away. If I'm wrong and my greatest cost is that of opportunity, I'll consider myself lucky.

  • Expiration hangovers typically last a few hours so give this minxy Monday market some time before taking her temperature (dealers need to square their overage May paper derivative exposure).

  • If you haven't signed up for your free two week trial to The Lavery Insight, you'll want to do so to get excellent economic analysis -- especially ahead of earnings and this week's numbers.

  • Yearning for earnings? Sharpen those pencils as we've got Bank America (BAC), Eli Lilly (LLY), and IBM (IBM) today, Coke (KO) and Merck (MRK) tomorrow, Wells Fargo (WFC), Apple (AAPL), McDonald's (MCD), Boeing (BA), Telephone (AT&T (T)) and Altria (MO) Wednesday, American Express (AXP), Microsoft (MSFT), Amazon (AMZN) and UPS (UPS) Thursday and Honeywell (HON) and 3M (MMM) Friday.

  • Speaking of Amazon, it's the lone stock in the master beta realm to be trading north of the flat line in the face of fugly futures this morning. That smells like telling demand, so keep that on ye radar as we edge out of this morning's gate. Also note that there is some unresolved business to the downside in the form of the gap nestled between $50 and $57.

  • I'm not sure I can remember traveling so much in such a short span of time but rest assured that it's consistent with building upon the mission of Minyanville. Towards that end, President Fish and I will be in Chi-town for a quickie trip this Thursday as we set the sail and tell the tale.

  • Awesome! Snaps to MV Family Media GM Laurie Petersen and the rest of the crew on Minyanland hop-scotching past 400,000 kids last week, affecting positive change through financial understanding for children all over the world.

  • Think positive, Minyans, profitability begins within. It may sound silly, but it's true. Trust me and try it, for a little perspective goes a mighty long way these days.


In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positive change in the lives of children.

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