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Monday Morning Quarterback: The Quarter-End Bender


Crosscurrents collide in the thin holiday stretch.

"Just Hold On Loosely, but don't let go. If you cling too tight babe, you're gonna loose control." -- .38 Special

Good morning and welcome back to the holiday pack. As starting players hit the sun and the sand, skeletal crews will trade the supply and demand. It's been a wicked front nine for investors in kind, with slippage into the abyss highlighting the first quarter and the mother of all rallies dominating the second.

With the DJIA and S&P straddling either side of the flat-line (snaps to the four-letter freaks for double-digit out-performance), the question on the lips of the critters is what's on tap for the back half of 2009? We've pondered that question the last few months as the market slithered sideways but the clock is ticking and the animal spirits are kicking.

What we know is there are two days left before books close and pens uncap as fund managers across the land share the state of their union. As offered Friday on Tech Ticker, the performance anxiety would make Bob Dole blush. How that influences the tape remains to be seen but for what it's worth, my sense is that we've seen the meat of the mark-up.

Be that as it may, this week-this thin, holiday, traditionally snoozy four-session stretch-includes the actual quarter-end and the beginning of a new month, which typically sees a slew of flows. It remains my humble view that if the bulls are gonna break on through to the other side, that window of opportunity is upon them.

Trade smart, see both sides, manage risk and understanding that second string staffers won't provide the liquidity we're ordinarily accustomed to, which could lead to an entirely more volatile week than we're used to when Uncle Sam waves that flag wide and high.

Some Random Thoughts:

  • Another wave of corporate bond issuance is underway. While the appetite for corporate credit has been strong of late-and is partially responsible for higher treasury yields (as investors swap instruments)-the reaction will speak volumes about risk appetites.

  • The structural backdrop is vastly different than it was entering September, (thank YOU taxpayer) but we would be wise to remember what happened the last time corporate issuance overwhelmed demand.

  • Left field catalysts entering the second half of the year?

  • For my part, I'm on the lookout for our oft-discussed "W" and operating through a technical lens of S&P 900 (875) on one side and S&P 955 on the other.

  • If you put a water pistol to my keppe, I'll offer that all else (the dollar) being equal, trading from the short side (into the aforementioned level) would prove profitable.

  • The trick to that trade, and why I'm using a stair-step approach, is to manage risk rather than chase reward. Nobody is smarter than the market but if the mechanics of our swing are solid, we've got a much higher probability of a profitable journey.

  • You want performance anxiety proxies? Easy-Amazon (AMZN), Google (GOOG), Research in Motion (RIMM), Apple (AAPL) and Baidu (BIDU). Those--along with Bank of America (BAC)-will be my individual trading tells today.

  • One of the more concerning elements of our current crossroads is the darkening social mood that continues to weigh on the collective psyche. Society is a sum of the parts despite the recent eye-popping rally or the scrubbed down BLS estimates.

  • That-coupled with the forward P/E on the S&P being close to where it was during the October 2007 top-is necessary perspective in our continued effort to "see both sides."

  • The Enterprise Products Partners (EPD) purchase of Teppco Partners (TPP) is constructive through the lens of "the wheels of capitalism." M&A, like most everything else in the markets, has waves and phases and it's nice to see deals getting done.

  • The purpose of the journey is the journey itself-this we know, even if we don't always remember-and it's never too late to kick-start personal progress. I was reminded of this while watching STYX this weekend, which also happened to be one of my first concerts ever. Time remains life's most precious commodity. Make it count and do it right for tomorrow is promised to nobody.

  • Good luck Minyans and let's be careful out there!


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