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Monday Morning Quarterback: Next Cut of the Sword


The epic battle between bulls and bears rages on.


"Five thousand of my men are out there in the freezing mud. Three thousand of them are bloodied and cleaved. Two thousand will never leave this place. I will not believe they fought and died for nothing."
Maximus, Gladiator

Good morning and welcome back to the flickering pack. After the fourth straight monthly slip for the market-the longest such streak since 2002-we enter the Coliseum ready to battle. The bulls and bears have a long history there, one that should be known by everyone with skin in the game.

The tape of late hasn't been what one would call "fun." Risk is palpable, headlines are daunting and social mood is increasingly austere. We've been delicately discussing the dynamic of tougher times and it's as unpopular now as it was a few years back. Unfortunately, the issues at hand seem to be resonating with more people as time passes.

Which brings us back to the stock market, the driver of prosperity in a finance-based economy, where fortunes are made and reputations can fade in the blink of an eye. You're only as good as your last trade, as many are learning as we travel the long, hard road, fighting for every meal along the way.

The task at hand in our epic battle is to identify the next swing of the sword. Will that blade bleed the bears that are now pressing obvious bets? Or has the death by 1000 credit cuts only just begun for the bulls, many of which still believe this is a painful yet passing fancy?

On Thursday, February 21st, we began discussing the potential for a massive move as a function of the credit-equity dichotomy. The next day, CNBC broadcast a rumor of a bond bailout that squeezed the markets 600 points higher. That deal never materialized and on Friday, the tape closed precisely at those levels.

The natural question is whether that lift shook out the shorts and set the stage for the real move. Time will tell, of course, but two-sided risks remain as we shift through the shadows and dust.

On my signal, unleash hell.

Some Random Thoughts to Start the Week

  • News is best at the top and worst at the bottom, a mantra that many have been leaning on of late. The issue is that nobody knows just how bad the news is going to get in terms of depth, scope or time.

  • One of my ten themes for 2008 was a stronger dollar. What's becoming evident is that a grabby greenback will be an effect-rather than a cause-of asset class deflation.

  • The obvious levels of downside lore are the January lows, which are S&P 1310 and DJIA 12,000 on a closing basis (S&P 1270, DJIA 11,640 intraday).

  • Are we basing under above the January lows or churning under S&P 1405 and DJIA 12,800? Yes.

  • Last week, Ben Bernanke spoke about providing market "insurance." Bernanke Insurance? The Greenspan Put? The more things change, the more they remain the same.

  • Baidu (BIDU) traded like it wanted to trade ten points higher on Friday, hugging the flat line in the face of fugliness. As I pared my financial put on Friday (discipline), I chose to do the same with the high beta beauty (going home flat). I will revisit the action today (both ways, as a function patience and eyes), keeping an open mind and understanding that someone may have had a month-end agenda.

  • Where is the weirdest place you ever made whoopee?

  • I like to listen to the "locker room chatter" at my gym as an anecdotal contrary indicator. Two years ago, the conversation was all about real estate. Into year-end, it was centered on and the emerging markets. Now? Small cap gold miners as an "undiscovered gem."

  • My, look at the time. I'm gonna hop over to the Buzz & Banter so, for those looking to continue this conversation in real time, I'll see you there!

  • Have a great week, Minyans.

  • R.P.

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    No positions in stocks mentioned.

    Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at

    The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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