Maybe I'm being dramatic but yesterday's session reminded me of Tiger Woods at the US Open. By all rights stocks should have been looking at a moral victory, just showing up. Instead, stocks climbed off the canvass and won with the equivalent of two broken legs in the form of earnings reports and guidance from American Express (AXP) and Apple (AAPL). Investors should have been throwing their hats in the air when the closing bell rang.

Now we need to figure out how this improbable session unfolded the way it did. Where did the grit and determination come from? I think the hero, without a doubt, was Charles Plosser (president of Federal Reserve Bank of Philadelphia). His comments about the economy sparked a reverse in the market even before the session began.

Mr. Plosser's observations that the economy would be firm this year and expand next year are part of his contention the Federal Reserve has the right cover to begin raising rates even before there are clear signs that the economy is out of the woods. He could have a point. Let’s face it, by the time the data becomes official through regular economic reports the results are hardly news. To be sure, this isn't the first time Plosser has made such comments and in fact last month similar statements sent the dollar higher.

Timing is everything, however, and yesterday the financial world was bracing (more like praying) for a leader to come up with a novel and believable approach to solving the crisis. The podium and spotlight belonged to Treasury Secretary, Hank Paulson (and he treated it as if enduring water boarding). But Charles Plosser stole the show -- thank goodness!

Crude Correction? 

I think investors have been so snake bitten by crude oil most are loathe to say out loud what they think and certainly hope is occurring. Could crude be in the midst of a real correction? I say it’s possibly happening. For me the big test on the downside comes at $120 a barrel, if that pivotal number doesn't hold as support then trading forces (read: panicked short term buyers) that trade any asset could push crude substantially lower. Hey, wouldn't it be interesting to see those folks long oil trying to explain why a correction is overdone and the antithesis of the fundamentals? It might also put to bed the notion that speculators can't lose money, even though folks in Congress only need to ask equity investors, who lost a couple trillion in the early part of the new millennium or real estate investors on the cusp of losing even more in the current housing correction.

One thing that is for sure, crude oil will not move much lower without a fight, there's too much money at stake. Right now I continue to say that the tables have turned and equities are pushing around crude oil -- not the other way around. When stocks begin to move higher, particularly those industries with heavy short positions like the airlines and financials, crude begins to move lower. Toss in a stronger dollar (thanks Plosser) and even Jed Clampett has a hitch in his nonchalant giddy up. By the way, demand continues to shift as consumers make adjustments. According to MasterCard (MA) demand for gasoline has declined for 13 straight weeks. Inventory numbers are out later today and could show more evidence of sharp shifts in consumer demands.

Technically crude oil appears to be in a precarious predicament as it closed at the low of the session yesterday and below its 50-day moving average. Although I think $120 is the key support point the chart suggests crude could tumble all the way to the 200-day moving average, which is currently around $110 a barrel.


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The Stock Market

These wild trading swings have become common place and more often than not periodic rebounds are greeted with harsh counter-attacks that push the market lower. It feels a little different this time. Maybe investors are making a mistake, but they aren't rotating into beaten down sectors for trades anymore.

For instance, its one thing to jump into the bank stocks a week ahead of earnings but another thing to load up these stocks after they've reported, especially when they've reported what essentially was an unmitigated disaster like the report from Wachovia (WB) before the opening bell yesterday. By all rights that stock should have been pounded into the ground. It could have been slammed and even management would have accepted the reaction.

Instead Wachovia was up 27% yesterday. May goodness, to bid up the stock to that degree is like graduating Magna Cum Laude with a few D's and F's. The action in the stock yesterday underscores two things: stocks can become oversold and maybe the banks will make it through this dark chapter.

The odd thing is nobody is talking "kitchen sink" anymore. In addition to becoming a worn out cliché the fact is the so-called “kitchen sink” never materialized. Even now banks can only guess at their exposure and risks. Yet, judging from the action in the sector it’s clear to me that many are assuming (although, too afraid to articulate the notion) history will look back and see that the June quarter 2008 was where the banking crisis hit rock bottom. Even if that's true, it’s not going to be smooth sailing ahead.

The only problem I had with the market yesterday was volume.