Can You Feel It?

Lots to cover tonight, for a nice change, so let’s get to it.  Obviously, we missed the call on the morning action as we figured it would be just another “Monday”.  (In our defense, we did say that the market probably wouldn’t hold any of the early gains.)  Overnight trading was uncharacteristically down going into Tuesday’s opening and the market opened with a bit of a thud.  So many times the market has managed to enjoy this type of opening and move it up shortly into the morning session, not so on Tuesday.  

Much to the bulls dismay, the market basically chopped around all day long with no real effort to the upside even though it closed near its best levels of the day, that was down over 60 points in the Dow.  The blame was given to oil which tacked on nearly 4% today moving above $66 again on Iranian concerns as well as disruptions in Nigerian oil.  The late summer highs over $70 look to be in sight with this recently powerful move up in oil, with some modest resistance near $68, but not much.

So, after a day of lower prices, the market looked to the news after the market closed for some hope.  That was not to come after INTC and YHOO both disappointed and dropped about 10% each on fairly strong volume in the after hours trading.  After that news, the futures are very weak this evening as we write this with the SP’s down about 9 points and the NASDAQ 100’s down about 25.  Wednesday’s trading will be something to see as the market unravels the mystery of where it wants to go after the bell.  

Wednesday morning brings the CPI with expectations of 0.2%.  This report has not generated much in the way of the market but with an opening like we are probably going to see on Wednesday (in case you didn’t read above very carefully, that would be Down) it could exacerbate the situation given it comes in a bit higher than that.  In all likelihood there will be very little response to the CPI numbers but we feel compelled to remind you that they are out there.

This past weekend I had an opportunity to read Barron’s magazine article that comes out in January each year, the Roundtable discussion.  This is a conversation with several high profile investment people making their annual predictions for the coming year.  There were some interesting comments and, as usual, differing opinions which is what makes this such a fascinating article to read each year.  The most “intelligent” comments were from the PIMCO bond king, Bill Gross, who we have quoted before.  

Mr. Gross suggested that there may be trouble in real estate land and in dollar land in the near term.  His point about real estate was the simple fact that so many people have recently used exotic mortgages to slip into housing that was just a little too pricey for them to buy with the traditional type mortgages.  Mr. Gross said that these ARM type mortgages are coming up for reset and that reset will automatically pop up the monthly payments required on these houses.  This will put additional pressure on the housing market as less and less speculation will be able to be done as people need to actually pay for some of that debt they created.

His other thought was regarding the dollar.  He said it was “doomed” as a currency.  Now, Mr. Gross can be a little cavalier in his description of things but he was trying to make an important point about the dollar.  This couples with the changing of the guard at the Fed from Greenspan to Bernanke.  

This market has a very sensitive tone to it this evening.  We’re not sure that all this bullishness can be rewarded with an up market.  We may be wrong but Wednesday could be a very difficult day.  Japan has been a good up run here over the last few months but after our news after the bell the Nikkei Dow is down over 700 points or about 5%.  If that can hold, New York will have a tough morning.  

Of course, the Fed’s beige book will be coming out right after lunch so maybe they can focus on what the Fed said a while back.  Then again, maybe not.

Dow Industrials:  10,896.32  -63.55
RYVNX:  17.43
RYAIX:   21.19
TLT:  92.44
BEGBX:  13.38