Top Line: The stock market is challenging our 12,750 resistance level. The area did hold the advance on Tuesday and we will need to keep an eye on it over the next couple of days. The NASDAQ indexes didn't do as well without IBM in them. In fact our own FSI was down to a new low with all four components down on the day (GOOG, AAPL, AMZN, RIMM).
The blue chip indexes (Dow INDU and SP500) enjoyed a good up run on Tuesday on the back of IBM's news that it would buy back another $15 billion worth of stock. When their announcement came, IBM jumped 4 points (about 4%) in about a minute, equivalent to about 40 points in the Dow. This news was enough to counteract all of the other negative news. Well, we're not sure the record oil price is negative news these days, we think so but the stock market doesn't.
The big bad news was the PPI, Producer Price Index, and that was up a magnificent 1% and the "core" PPI was a little high, too, at 0.4%. The other number was the consumer confidence at 75, a number that the WSJ says is the lowest in 15 years except for the early days of the Iraq war.
Another article that popped up in the WSJ on Tuesday was an (opinion) article on the bond insurers entitled "AAA Oliopoly" back on page A18. Since it is a pay site, we thought we should let you know the key point--"why were the bond insurers facing downgrades in the first place?" The article says that it's in part due to the original "faulty" ratings from S&P or Moody's.
Back to the future: The stock market is at a critical point here. As negative as the news is, there should be no possible way the market could go up but...We know that the news doesn't drive stock prices. We need to wait another day or two to see if the 12,750 level holds the advance. There are strong month end tendencies--which we acknowledge but don't believe they really matter. But, we wait...
FSI: 74.07 (new low after GOOG's back to back 20 point plus down moves)
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