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Random Thoughts: Writing the Fourth Quarter Script

By the fourth quarter script obvious to the upside?

  • Given the flat futures in the face of negative news, this first thrust higher was intuitive (reaction to news is more important than the news itself).

  • The rampage in emerging markets has a distinctive "blow-off " feel to them. The question is whether this is 1999 or 2000. Parabolic frolics have great storylines and charismatic actors but rarely feature happy endings.

  • Following a quiet week and a strong quarter, the question on everyone's mind is "If a global credit crunch couldn't get 'em down, is the fourth quarter script obvious to the upside?"

  • That, along with the fact that the DJIA has rallied in the fourth quarter nine consecutive years and 24 of the past 27 years is quickly morphing is driving collective perception through Matador City. That begs the question of whether a pop & drop (following a "breakout" to new highs) is the new path of maximum frustration.

  • What's Netbank? Only the largest bank failure since the savings-and-loan crisis of the early '90's.

  • Do the financials still matter? If you believe they do, the BKX "non-confirmation" of the recent rally is cause for pause. Ditto the trannies, which continue to "churn" under previous resistance.

  • What else is up? Breadth is better than 2:1 positive, beta (BIDU, RIMM, AMZN) is showing signs of strain (shocker given the quarter is over, eh?), the dollar is higher (contra-tell?) and I'm balancing the potential for the post mark-up blues against the specter of inflows.

  • I do, so it's said, expect a stern test at a point this week.

  • The Fed pushed risk out on the curve as a function of the on-the-fly discount rate audible and aggressive easing policy. The S&P is now up 11% since that initial action so keep in mind that by the time a move becomes obvious, the easy trade is likely over.

  • Sad day for Mets fans but there's plenty of room on the Raider bandwagon! I know it's only week four but I'll take a tie for first place and enjoy it while it lasts!

  • Minyan Michael Santoli's always salient Barron's column highlighted the commonalities and the differences between the current market and the soon-to-be-loud 20th anniversary of the'87 crash. If you haven't read it, it's worth a gander.

  • From my perch, a slew of shorts covered up as funds punted their hedges. The smartest money I know is using this juncture to load up on volatility. So you know and so it's said.

  • The tail that WAGs the dog? Minyan Michael notes the action in Walgreen's, a "save haven" consumer play. The stock is getting waxed to the tune of 15% this morning following it's earnings report.

  • The hand that rocks the cradle? For all you handicappers out there, the odds of an additional quarter point cut at the Halloween FOMC meeting have risen from 72% to 84%.

  • Shocker, Fokker? Is it really a surprise that the financials are not "confirming" the upside given that M&A deal volume is down 42% from the previous quarter?

  • Put that in your pipeline and smoke it! After FDC's high profile deal last week, all eyes now turn to ASN, TXU and CDWC as the "on deck" deals to watch.

  • Hello Sparkness my old friend! Oh yeah, DJIA 14,000 is back on our radar. I don't watch the industrials, per se, but as it's "large and in charge" milestone-wise (psychology), it's worthy of a mention as we assimilate the metrics.


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