Monday Mop-Up

That was the least exciting 90 points we ever gained.

We were not very happy with that rally as it was just the typical M&A Monday sort of thing without the broader participation we would have liked to see that would have indicated a run-up to new highs.

Our finish was very weak and we failed to retake Friday's open with the poor Russell still stuck in the mud, down 1.5% for the past 5 days.  We are still up about 5% for the month (with poor Russell dragging us down) but the SOX have given up their leadership and no new index looks anxious to take their place.

That was surprising as there was EVEN MORE M&A activity than I reported in the morning as URI agreed to go private for $7Bn and NOK/SI is offering $7Bn for TLAB (if $7Bn is some sort of magic number I will humbly offer PhilStockWorld up for consideration!).  When $105Bn is offered up to the markets in one day and we can't hold  a 100 point gain – that is not a day we can crow about!

35 of the Dow's 92 point gain came from MRK, who ran into heavy selling near the close and the post-market reporting was bad to say the least with AXP missing by .03, TXN just in-line, NFLX guiding down, AMLN in-line and ALTR reporting declining revenues.  None of that really matters as tomorrow morning is a very busy day with morning earnings from AKS, BIIB, BJS, BNI, BP, BTU, CFC, CME, DD, EDU, KMB, JBLU, LLY, LM, MCD, NOC, OXY, PEP, SVU, T, X, UAUA, UPS, USG, WAT and XTO followed by AMZN, AFL, BXP, CAKE, CB, CTX, PNRA, RDN, STM and RHI at the close so we'll check our levels and see how things are shaking out:

That's a lot of work to get pretty much nowhere from last week's chart.  While Asia continues to make strong advances, Europe has been quietly slipping away with the CAC falling through our tight ranges since the 13th, when it peaked out on the elections.

While oil came down a bit, it didn't come down enough yet but the finish under $75 was encouraging as it broke a trend of senseless pumping which, as I said in the morning, is getting more and more expensive to maintain as the market treads into backwardation.  It will not do us any good if the front-month contracts fall without the longer contracts as that simply reestablishes contango and sets us up for a new round of shenanigans

Adam Hamilton at 321Energy.com is an energy bull calling for a correction in the sector as we clearly have moved into an extremely overbought situation:

We'll find out this week if the energy sector can justify approaching a combined market cap ($4T) that is larger than the GDP of Japan or India (or any of the other 224 nations of the World other than China and the United States).  In fact, the "bottom" 200 nations combined efforts, all the year's labor of 3Bn people would not be enough to buy out this sector of our economy, which has grown 300% in 4 glorious years of unfettered capitalism into a gaping black hole that sucks up 75% of global economic growth in order to feed the beast.

Speaking of beastly, the dollar finally found a bit of support after bottoming out (we hope) at 80.12 as Paulson hit the chat circuit and talked up the greenback.  When someone asks if that is the LEAST this country can do to support the dollar, the answer is yes, jawboning the dollar up with no change in policy is really the least possible effort that can be put in while still pretending you are trying to support a currency.

"We feel very strongly, I do, that a strong dollar is in our nation's interest," Paulson said on CNBC television. "The dollar's value should be determined in a competitive marketplace, based upon underlying economic fundamentals."