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The Band Stand

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What's clear is that the matches are in the hands of many. What remains to be seen is when someone strikes the match.

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Playing, playing in the band
Daybreak, daybreak on the land


(Grateful Dead)



Good morning and welcome back to the flickering pack. We power up the Thursday pup with one eye on earnings and the other on the macro landscape. At stake are the keys to the summer vault as we toggle between the two sides of the S&P band camp.


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By now you know the cause for upside pause. S&P and Moody's finally fessed that something is structurally amiss and Sallie Mae (SLM) furthered concerns that debt-induced deals are vulnerable to shifting structures and higher rates.

The underlying elements for an unwind have been in place, mind you, they've simply lacked a catalyst. And it's difficult to ascertain whether Bear Stearns (BSC), CDO's or mark-to-market will serve as the spark in the dark.

What's clear is that the matches are in the hands of many. What remains to be seen is when someone strikes the match.

We've spoken about this dynamic at length in Minyanville. In the context of a finance-based economy, the market machination is dependent of cheap capital and the velocity of money. With total debt more than 350% of GDP, the cumulative effects of a pebble have profound implications for the pond.

Naturally, as the Sallie Mae news hit the tape, equities found a bid and furthered the path of maximum frustration. It's tricky in the least and frustrating at best but the onus is on us to manage risk, a novel concept in a societal structural conditioned to chase reward.

Wal-Mart (WMT) reaffirmed its forecast this morning, which is being welcomed by investors in the early morning action. On the heels of Home Depot (HD) and Sears Holdings (SHLD), the price action will serve as a good sentiment proxy today.

Tertiary tells include Goldman (GS)and the financials (BKX 114 is a level to watch), market breadth (currently 3:1 positive), beta (Google (GOOG), Yahoo (YHOO)and eBay (EBAY) are curiously absent from the early lift) and the dollar (as it tickles decade lows).

Good luck today.

R.P.
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