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Monday Morning Masters: In Search of the Green Jacket


There's worry in the market, but each day brings hope anew.


Good morning and welcome back to the jittery pack. Following Friday's General Malaise, we awake to find the world awash in worry. Asian issues took it on the chin, with China off 5.6%, the Hang Seng 3.5% lower and Japan down 3%, while Europe dabbles in downside ketchup, 1% lower across the board.

The fresh concerns were sparked by the bearded financials, stocks seemingly immune to the credit crunch that have large finance operations. We discussed this on Friday, drawing attention to previous work we've done on the General Motors (GM), General Electrics (GE) and Fords (F) of the world. If we're to learn from the past, live in the present and cast an eye towards the future, it's time to apply our lessons in kind.

The trick to the trade (and trading in general) is to look at the market through a forward-looking lens. While the New York Times drew attention to the fact that "defaults on other sorts of consumer loans, like credit cards and auto debt, have been soaring… and those loans may surprise investors" over the weekend, we must spy that dynamic with foresight such that we can proactively prepare our portfolios.

Following the 10% lift of the St. Patrick Day lows, we mused that earnings assurance would be needed to push the tape through critical resistance. After last week's let down by Alcoa (AA), General Electric and UPS (UPS)-and, perhaps more important, the reaction to that news-fundamental validation remains elusive. Indeed, the entire "wowzer rally" that greeted the second quarter is now dust in the wind, dude.

Alas, the beauty of this business is that each day possesses fresh promise and purpose. With that in mind and positive thoughts in tow, we offer these seemingly random thoughts to kick off our five-session stretch:

  • We've been highlighting the difference between churning and basing as the indices meander below resistance at S&P 1405, INDU 12,800 and Russell 735. All three sisters remain stuck in the former storm.

  • S&P 1315 is also a level to watch. Why? It's the first "higher low" after the maiden throw and a cliff branch for the bulls.

  • Hank Paulson assured finance ministers and central bankers from around the world on Friday that the U.S economic picture could improve later this year and that the government was doing all it could to hasten the recovery. Shortly thereafter, at a news conference, he said that the slump had yet to run its course and "the risks are to the downside."

  • While I understand the need to remain calm-think Dr. Fredrick Frankenstein after the monster Puts on the Ritz-it would be nice if our Treasury Secretary or Federal Reserve Chairman were proactive in prose or posture. This way, we wouldn't have to wait for something bad to happen in order to recognize and avoid the risks.

  • We always talk about the ability to learn a lot just by watching. On Friday, I spied Wachovia Bank (WB) trading quite dry and took some calls home for the weekend. I could also hear Winky laughing this morning as the news hit and the stock dropped like glass-jawed middleweight.

  • "Food Inflation, Riots Spark Worries for World Leaders" and "Washington is hardening its rhetoric towards Iran" are two recent Wall Street Journal headlines that support our unfortunately accurate theme on heightening societal acrimony. Keep your wits about you and remain lucid, Minyans, it'll serve you in mighty good stead.

  • If you've got Mini-Minyans running around your roost, turn 'em on to Minyanland so they can join over 60,000 of their friends learning earning, spending, saving and giving!

Good luck, Minyans, let's make this week a winner!


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