Tuesday, March 20, 2007

More Gains for Stocks

US indices registered their second straight day of gains in anticipation of the FOMC policy statement Wednesday afternoon. Essentially, the market is celebrating the Fed doing nothing, so the adage, "no news is good news" is applicable to this market.

The Fed governors, as is their wont, will have a teleconference tomorrow and proudly announce that the economy is in good shape, nothing to see here, all's well, and traders will go back to doing what they do best, i.e., buying and selling stocks. It's a little like a Samuel Beckett play over three days, but with a lot less drama. Or, put another way, with nothing better to do, investors buy stocks. Would that it were always so easy.

Tuesday's gains were roughly half of Monday's and they were made on fairly modest volume, indicating that there's no big rush to snap up bargains here, as some of the more bullish analysts would have you believe. There's got to be more than a non-movement by the Fed to really incite buyers. At least that's what the charts and market internals are saying.

Dow 12,288.10 +61.93; NASDAQ 2,408.21 +13.80; S&P 500 1,410.94 +8.88; NYSE Composite 9,158.27 +67.27

All of the data lined up today in the bulls' favor. Advancing issues outflanked decliners by an 11-5 margin, and new highs overwhelmed new lows by an overall 247-82. Regarding that last reading, it's going to stay that way until there's another batch of selling and a retest of the 12,050-12,100 level on the Dow.

The correction that's now reached 5 weeks has run out of horror stories and selling scenarios. While the recent news and economic reports haven't been particularly stellar, neither have they been gloomy. Mostly, there's been a general dearth of news, positive or negative, giving most of the investors entertaining worrisome thoughts of closing positions pause.

With the Fed unlikely to do or say anything market-moving, the pause will likely continue, making this third full week of March one of the slowest of the young year.

Helping stocks regain some of their lost footing is the price of oil, which gained a mere 14 cents today, closing at $56.73, a relatively tame number. Another 3 or 4 dollar fall in crude could actually spark a rally, though nobody is basing any hopes on such an occurrence.

Gold gained 4.70 to $659.00 and silver added 0.14 to $13.37, but the precious metals remain stuck in what has become a ten-month old rut. Gold hit a multi-year high of $741 late last April. Since then, it's dropped below $600 briefly a couple of times, has yet to pierce the $700 mark and still isn't close. That's the problem with hedges such as metals. Sometimes there's nothing much to hedge.

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