Thrill a Minute Thursday

That was exciting!

At this point I’m feeling very over-covered and I’m wondering if I would have been happy riding into the weekend without the June covers we took yesterday.  As you can see from Trader Mike’s Dow chart, my worry is that we will test the declining 50 dma again and have another sharp fall, like we did a week ago (I know, who can remember way back then?), when the Dow dropped from 13,100 all the way back to 12,700.

It may actually be different this time because the Nasdaq did finall break out over that 2,525 mark and did so with authority today and the SOX are well over our 400 mark and punched through the 200 dma at 417 today.  This is what I’ve been saying we need to get back in rally mode all year so I should be in a bullish frenzy right?

I guess I have to stop worrying and learn to love $125 oil but I don’t think that’s what got the market excited yesterday.  I think what happened yesterday is that the market got excited by the drop in oil, picked up a huge amount of momentum as oil fell to $120.65 on yesterday’s sell-off, and then was carried forward by a huge rally in the energy sector that took us through the afternoon.  So it’s the "same old, same old" that we were worried about last week BUT with technical strength that can take us up considerably if we don’t get derailed. 

Tomorrow we get the Michigan Consumer Sentiment poll, which everyone knows will suck as well as Housing Starts and Building Permits (if any), which also have such low expectations that missing them will cause me to immediately put my own home up for sale and start renting. 

John McCain may have also helped the markets along with his new campaign slogan – 4 More Years of War – as he sets a drawdown date of January 2013 and I’m very anxious to see how Fox News and other conservatives attack McCain for his use of a "timetable", something they have argued for 5 years would be a ridiculous thing that would only encourage the insurgents, who will (if I remember the logic correctly) only hunker down and bide their time, waiting for us to go home. 

"By January 2013," McCain predicted, "America has welcomed home most of the servicemen and women who have sacrificed terribly so that America might be secure in her freedom. The Iraq war has been won."  He reinforced the message in an email to supporters, with the promise regarding Iraq highlighted in bold, so you know he REALLY means it.  This is a 96% reduction of the Senator’s previous prediction of 100 years so kudos to him for cutting it down but let’s remember that we do have 155,000 troops and 180,000 "support personnel" and contractors over in Iraq so that’s going to have to be some tight timetable over 4 years.

"It’s not a timetable," he told reporters on his bus after his speech. "It’s victory; victory which I have always predicted."  Oops, so much for that thought! 

McCain has repeatedly attacked Democrats for promising a withdrawal of troops. Last month, in a speech to members of the Veterans of Foreign Wars, he said:  “I do not believe that anyone should make promises as a candidate for president that they cannot keep if elected. To promise a withdrawal of our forces from Iraq, regardless of the calamitous consequences to the Iraqi people, our most vital interests, and the future of the Middle East, is the height of irresponsibility. It is a failure of leadership.”

Still, this is actually an improvement as now all three potential Presidents are saying the US will stop this nonsense eventually.  That is a good thing for the markets.

Also good for the markets was CBS announcing they will acquire CNET for $1.8Bn (a 40% premium), a move that is positive for the entire internet sector.  The market ignored the 371,000 jobless claims we got in the morning (400,000 is considered a recession) and also ignored the 0.7% drop in industrial production, which was more than double the 0.3% expected.  Cap Utilization also fell short at 79.7% by 0.4% and the Empire State Manufacturing Index came in at -3.2 vs. +1.0 that was expected but the Philly Fed was actually better than the -19 expected at -15.6 so I guess THAT was a reason to rally (end sarcasm font).

So I guess I’m extremely cautiously optimistic.  You have to think it’s a good thing that we can blow off all this negative news but what’s still bothering me is – all this negative news…