A Resilient Market (At Least For One Day)

Well, we saw oil go up over $5 per barrel towards the end of the day and the market tried to go down but wouldn’t.  That’s a positive.  This was on top of Congressional hearings about changing the financial system as we know it.  And that was on top of rumors about various institutions including Pimco not doing business with Lehman Brothers anymore which was denied by Bill Gross.  And that was on top of more tension surrounding Iran’s nuclear threat and fears of oil spiking to $250 overnight. 

Not bad finishing up almost 100 on the Dow.  Granted, Alcoa (AA) was the majority of those points.  But, hey, they reported good earnings and they are part of the Dow. 

Dow Chemical announced this morning they were making a major acquisition and acquiring Rohm & Haas for a 74% premium!  They apparently thought that stock was extremely cheap.  Traders see that and think if Dow Chemical thinks they’re cheap, maybe there are a lot of stocks that are cheap.  So, up we went.

But, enough news.  What do we do about it?  I continue to like steel, coal, energy, & agribusiness.  How can you not?  The fundamentals continue to improve.  The earnings will continue to be great and they have all sold off quite a bit.  At the same time, staying short the broad market is a safe way to play this.  I will continue to add to the strongest areas that are temporarily down. 

I believe we’re going higher over the next few weeks because too many people are leaning one way.  They’re getting out of stocks too fast and too many stocks are headed straight down.  So, we’ll go up for a while.  Now, don’t understand me.  I’m not so confident that I’m throwing caution to the wind.  Of the rallies we’ve had 2 out of past 3 days, the internals were very weak.  But, we’re so oversold that a rally is inevitable.  I just can’t tell yet what the quality of that rally will look like.  But, to overcome all the market did today, not bad.


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July 2008
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