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Making Moves


Change in course on horizon.


Yesterday was an odd session of sorts. I thought stocks would spend most of the session moving sideways or actually moving lower, but stocks found buyers relatively quickly. However, there were some problems throughout.

I know I may sound like a broken record, but volume continues to be worrisome and there was a lack of leadership. Moreover, caution was expressed through the fact that blue chips held their own while the NASDAQ composite saw the wheels fall off after stalling midway through the session. Despite the hype of the Microsoft (MSFT) / Yahoo (YHOO) deal and the upgrade of the semiconductors yesterday the NASDAQ composite really had the Monday blahs. At this point in the rebound, investors certainly want news that's definitive with respect to the economy.

Just what makes that little old ant think he'll move that rubber tree plant?
Anyone knows an ant can't move a rubber tree plant.
But he's got high hopes, he's got high hopes...
He's got high apple pie in the sky hopes.

- High Hopes (Sammy Cahn and Jimmy Van Heusen, performed by Frank Sinatra)

Right now economic data has been good enough to mitigate or belie the notion that the country is in a recession or to show that if it's a recession, it will be shallow. Yet at this point the market may not really care about the recession as much as the recovery. With that in mind there could be this continued pall over the market because the data everyone needs to see isn't on the docket. I'm not even sure if economic data released next month and in July would be enough to answer those lingering questions. That said, it is obvious, too, that the bias has shifted to the upside. The first three months of the year were marked initially by unbridled fear and then a so-called strike by would-be buyers. Now there is a so-called strike among would-be sellers. However, we can't confuse reluctant buyers as the ultimate buy signal.

Don't get me wrong: I'm bullish but mostly on individual opportunity. I've been sending alerts to take profits, especially on things that have gone parabolic. I felt the market was set up almost out of the gate even as the Dow was up 150 points.

While we wait for signs of economic improvement, financial stocks are decidedly laggards. Unlike the NASDAQ, which has made a great move from the 2008 low, the financials are still the epicenter of concern. The group has been drifting on light volume so there haven't been any alarms but some of these stocks are nearing pivotal support points as is the SPDR Financial Sector (XLF). What I'm more concerned about are the gaps to the downside (see red arrows on chart) that have become so commonplace in the XLF exchange traded fund. The chart for the XLF is in a pennant formation and that typically means a meaningful move is on the near term horizon, the direction is the question.

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Gas Price Pains

There were comments yesterday from management at Sandisk (SNDK) that higher oil prices will hurt discretionary spending. It's going to be very important that the CEO does a little damage spin today, if he can. While we wait to see if those comments could be mitigated nothing is slowing the run in gasoline. Last night petroleum prices where updated and regular gasoline climbed to 376.2 cents from 369.4 a week earlier. Experts said $4.00 a gallon wasn't possible this year but many think that number could happen before the summer starts: I don't think so, however.

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Housing Bill

There will be high drama on Capitol Hill with President George Bush playing the role of Gary Cooper in High Noon. After going nearly two presidential terms without a veto, the president is ready to shoot down the housing bill, or that was the word, at least, ahead of the new deal (no pun intended) hammered out in the Senate and crafted by Senators Chris Dodd and Richard Shelby.

It would be a heck of a gambit for the President to veto the bill in this highly charged political season and amidst the outcry of the general public. The Federal Housing Administration would refinance and insure up to $300 billion in subprime loans under water. Fannie Mae (FNM) and Freddie Mac (FRE) would play a role as well. The word is this bill will not cost taxpayers, but I still don't get it because it seems to me that at some point connecting the dots takes us back to funds snatched from taxpayers.

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