Wednesday 07/23/08
WEDNESDAY MORNING UPDATE at 11:08 AM EST
Yesterday's market action was the most encouraging I have seen in the last 5 months and even though we may not have seen the end of pullbacks (we could still see a 5% payment for recent gains) it does make the likelyhood that the bottom to the overall decline is in place and should hold. The last 20 minutes of the day saw over 100 points added to the DOW in a powerful across the board rally.
Our PCI saw a substantial shift in power as we had five of our monitored indices switch from cash to buy positions.
The most stunning moves were on the XLA airline index which has been dead ever since oil began it ride up. UAL alone is up 18% this morning even as oil continues to drop despite hurricane activity in the Gulf of Mexico.
Banks also are beginning to show the blowout earnings I had predicted. BAC has added 80 billion to its market cap in just the last week. Most think this is artificial because the sector is so depressed, but remember all of the gains we look at are going to be year-over=year as we move into the final quarter and financials are holding back the real growth numbers on the SP500 and other major indices. My prognostications for the end of the year Sp500 growth are too unbelievable for most to handle at this point so I have only shared them with a few, but as we get further into the quarter I will let you all in on my thoughts.
Oil is taking another slide this morning even as a hurricane strikes Brownsville Texas, but nobody seems to care. We are now in Backwardation rather than Contango on oil futures and I don't see any reason for that to change over the short term.
AAPL, as indicated in my Monday night commentary, saw a huge selloff of better than 10% the following morning. Last year we saw the same trade. After earnings came out and blew the socks off of estimates, traders sold the stock off 10% the next day. 10 days later the stock was up 13% and ended up with a 54% gain for the quarter. This time around was different. They didn't wait 10 days. By the end of the day they were off by just 2.6% and AAPL has pulled back even. There is no reason why we shouldnt see comparable performance this quarter.
Our short term (3 month, pretty red and blue) market health charts have not flashed an all clear yet, but have turned positive and if we get a continuation will be telling us to buy shortly.
