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Monday Morning Market Madness


Let the games begin.


It's the simple pleasures that matter these days. As the economy struggles, unemployment abounds and geopolitical fragility dominates the headlines, there are increasingly few healthy pleasures that unite people in a benevolent manner

There's philanthropy, but those efforts have suffered as disposable income dwindles.

Movies? Perhaps; they're an escape, a two-hour respite from the reality if you will.

The Olympics or the World Cup? Maybe, but we're in-between those events and many are indifferent with regard to the outcome.

And then there's March Madness; the single greatest sporting event of the year. 65 NCAA teams enter, one emerges, and it's rife with Cinderella stories, improbable upsets, magical runs and buzzer-beating, heart-pounding suspense. It's hard not to be caught up in the emotion; it's difficult not to root for these kids as they leave it all on the court in a quest for the crown.

There's a tradition in Minyanville, one that has been around as long as the critters themselves. It's called Minyan March Madness and it's our annual community drive to have some fun and help some children. We encourage all Minyans to participate; the winner will receive bragging rights for the year and some snazzy critter schwag while non-winners (there are no "losers") will have the right -- but not the obligation -- to make a donation of their choice to The Ruby Peck Foundation for Children's Education.

During these trying times, we do what we can when we can (and only if we can). That's the Minyan way and on behalf of Ruby and the kids, we wish you the best of luck with your brackets. Register for Minyanville's 2010 pool by clicking here. The group password is "minyans." If you do not already have a Sportsline ID you will need to create one (it's free and easy).

Final submissions are due by Thursday (3/18) at 12:00 PM EST.

Minyan March Madness!

Since breaking out above S&P 1120, the low volume grind rallied the tape directly to the 2010 highs, where we currently sit. We've discussed our stair-step approach to the market -- S&P 1120, S&P 1150 and meaningful resistance at S&P 1200, if and when. The question, of course, is whether we'll get there.

Last week we spoke at length about the two-sided risk of sweeping regulatory reform, particularly as it relates to the potential ban on naked CDS speculation. While Europe was supposed to weigh in on this topic Friday, the final fifth of our freaky week came and went with nary a peep from across the pond. As we said last week:

"Should this legislation fast-track, there should be more gains to come, although it will do little to "cure" the underlying disease (and some of it is surely discounted). If it's delayed -- or worse, turns out to be an empty initiative -- trap door risk exists as there are far fewer shorts to absorb the supply that will materialize."

While I viewed the news void as anticlimactic, Hoofy was quick to disagree. "Dude, this tape is healthy," he just said as he strolled by in some strange attire, "we're working off the near-term overbought conditions as a function of time rather than price and that's constructive digestion."

There's no denying he's earned the benefit of the doubt; the fundamental and technical metrics are constructive and that's been enough to for greed to trump fear. The caveat is the unforeseen structural risk (as we've discussed) and the attendant psychology. We've indeed climbed a huge wall of worry; the risk is akin to this song.

S&P 1150 matters for a few reasons; should we fail in and around here, we'll have our "hindsight double top" that mirrors an emerging double bottom in the VXO (fear index). It's an "if-then" scenario but we don't get paid on the past, we get paid on the future and this should be on all Minyan radars.

Click to enlarge

Random Thoughts

  • No, the markets didn't open an hour early today; yesterday was Daylight Savings. Spring forward, my friends, and let's leave this winter in the dust.

  • Say what you will about Moody's (MCO) but I concur with them regarding Aaa ratings for the US and UK, as they wrote in a recent report, "Growth alone will not resolve an increasingly complicated debt equation. Preserving debt affordability at levels consistent with Aaa ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion."

  • In other words, the crisis is evolving from the financial to the economic to the social sphere; that's old hat for ye faithful.

  • Minyan Eric asks, "Could KKR listing on the NYSE and the General Growth Properties (GGP) bidding battle be the modern day equivalents of Blackstone (BX) and Equity Office Properties in 2007? Could they be 'bells ringing' as to only be understood in retrospect?"

  • I'm laying 50:1 that the next 18 points in the VXO is higher.

  • In these wild days of acrimonious haze, it's good to be surrounded with people we trust who have skill-sets that complement our own while attempting to serve the greater good. Or, at least that's what we try to do.

  • We offered some well-deserved love and admiration to our brother Bennet Sedacca on Friday; if you missed it, please take a moment to reflect and remember.

  • Does anyone else see the boutique brokers -- MKM, WJB, BTIG -- building market and mindshare? As Minyans well know, the leaders that emerge from the crisis are never the same as those who enter it.

  • When speculative volume increases in a narrowing band of stocks -- such as Citigroup (C), Fannie Mae (FNM), Freddie Mac (FRE), and AIG (AIG) -- it's typically a red flag for the broader tape.

  • Even the bears are posturing for a "pullback rather than a reversal" given the recent run. That warrants a mention, particularly through the lens of this emotional continuum:

    Click to enlarge

  • If you're lost in the lingo, the MV dictionary may help.

  • We strive to always see both sides in the 'Ville and now you do. This article, posted last week, is getting a lot of play around the Street. Please see it, even if you don't agree with it. The friction between opinions is where true education resides.

  • Good luck this week, Minyans; let's hit 'em hard.


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