Tuesday Wrap-Up

Another so-so day in the markets but the NYSE broke out so I'm happy about that.

Although the gains came pretty much at the end of the day, looking at this 5-day chart of our major indices (up about 1.5%) can't make us too sad.  Anything less than a half-point pullback this week, as earnings begin, will be a major victory for the bulls.  The SOX remain our pokiest index on the monthly chart but they've been keeping up for the week just fine.  In the longer-term view, there was far more volume on our last little sell-off than there was during last year's drop, indicating this turn back up may be very real.

While it's exciting to see our markets perking up like this, let's keep in mind that it's coming at a terrible price.  Those dollars you have sitting in nice, safe bank accounts and other low-yielding, long-term investments are getting crushed by the global economy.  US equities are at fire-sale prices to EU investors whose currency is pushing back to an all-time high against the dollar, up 60% since Bush took office (not that there's a connection, just marking time!).

The dollar was just pounded in today's trading, down .5% and finishing at the lowest level since early December at 82.67, just a quarter point above a low that hasn't been seen since early '05.  David Fry points out that the IEF, Treasury Index is falling to critical resistance as we may be falling off a double top as foreign investors start treating our dollar like financial kryptonite:

Notice that very scary MACD line.  If this breaks down, so will the markets as they have a fairly good correlation over the long-term with the IEF about 4 months ahead.  That means a serious drop here will telegraph a pretty dramatic sell-off but we are still above last summer's lows (for the moment).

Another fairly tight correlation is on the relatively new DBE ETF.  The DBE tracks crude, gasoline, heating oil and natural gas and will make an excellent tracking stock for us.  Check out it's nice short-term tracking against VLO, TSO and XOM.

The NYSE was the star of the show today and is always my favorite leader.  If we can get a confirm from the Russell we'll be in very good shape but, as I said, with earnings out this week I will be considering a drop of less than .5% to be a huge victory:

The transports are still dragging us down but that's understandable with an oil market that just won't die.  We'll see what the inventory reports say tomorrow but, as I said in today's comments, the .38 rise in oil was a pathetic bounce after a $2.77 drop the day before and, coming on the heels of a .5% dollar drop the day's action left them barely even.  Failing to close over $62 was yet another embarrassment for the oil bulls.

To say the weekly chart of oil is not sexy would be quite an understatement.  We are effectively coming off a peak of $66, which was barely a 50% retracement of the drop from $79 to $52 (and didn't hold) and after dropping 6% in just 4 sessions, anything less than a 33% bounce back ($1.35, to $63.50) is a big technical problem.  The 50 dma at $61 would ordinarily provide support but nothing will save oil from a surprise inventory build tomorrow, especially if it comes on the gasoline side.

Remember the natural gas cartel that was forming?  Neither do the Criminal Narrators Boosting Crude.  After talking it up for 2 weeks as a situation that would rock the markets and potentially send natural gas prices back to all-time highs, the conference ended with barely a whimper.  In fact, you will see very little coverage of the non-event in any US paper BECAUSE IF IT'S NOT SCARY IT'S BORING!   As I said in my weekend rant against the MSM, there's money to be made by keeping you cowering in your corner like good little consumer sheep and now our pals at the WSJ have decided to feature (I kid you not) a Real-Time Global Disaster Map, just to make sure you know that something is always going wrong somewhere.

Remember, if you are not living in a fairly constant state of fear and worry, you might stop to question the government's failure to use our 1Bn barrels of strategic petroleum strategically.  You may start to wonder why no refineries have been built in the entire United States since 1976 while the crack spread (mark-up) climbs from $10 (historical average) to $27 a barrel (current west coast spread).  Yes, I know they blame the tree huggers but that doesn't seem to stop them from building nuclear plants or scrapping plans to curtail greenhouse emissions from factories.  You will fear what they tell you to fear and you will love what they tell you to love.

"And if all others accepted the lie which the Party imposed—if all records told the same tale—then the lie passed into history and became truth. 'Who controls the past' ran the Party slogan, 'controls the future: who controls the present controls the past.'" – George Orwell, 1984