Top Line: The stock market eked out a small gain on Thursday, not much in the way of a rebound given the steep declines seen since Monday. With 12,750 Above us, the market will have a lot of difficulty getting back above that level. The path of least resistance should continue to be in the Southerly direction.
In our last post, we spent a little time reviewing XOM (Exxon Mobil) saying that the outside down day after an all time new high should nail the top. Today the stock was down again and today oil was down, too. These two entities should now be ready to go down in tandem. We have thought that the current run up in gas prices has to do more with the Memorial Day holiday than with actual Demand for gas. While that position could be challenged easily, we still think the price of oil has finally topped and the rest of the commodities are going to go down together.
Today, Bill Gross, aka the bond king, gave us his version of what's important, inflation. He's always a good read so we have added his comments here. We are not really in the inflation camp at the moment due to the current social mood on credit. We think the citizens of the US feel almost cheated by the $600 rebate program because food costs so much and then you actually have to pay for gas to get to the grocery store. The days of one upping your neighbor have almost disappeared over night. People are now saying/thinking, "How do they have enough money to buy that car?" not, "If they can buy that new car, I can buy a Hummer." Ok, maybe not that exactly.
The Treasury bond market was down significantly today but it looks worse than it is. Since the bonds are not breaking through the lows set over the past few weeks, so the market seems to be saying the bonds are a short term buy. We might agree, for a few weeks.
The stock market had very little movement today suggesting the buyers may be on strike. We are coming up on a long holiday weekend which will give several people a chance to think about the price of gas in relation to the price of their portfolio. We'll see what happens next week.
Friday brings us the latest read on existing home sales, which remember tends to be a little bit of a lag. Of course, these numbers by themselves do not really make the news anymore, unless the news seems to be positive. The expectation is for a drop in this number which does open up the possibility of a win for the bulls. However, we are now in the period of time when the news and the market will be traveling in the same direction--so, while we predict a negative reaction to whatever the news is, we think the news will not be good either.
With the long weekend, we will not post again until Monday evening which is the evening before the next market day. Have a safe weekend and come back again sometime soon.
FSI: 90.92 (just a little down from yesterday)