Not-So-High Noon Sparks Rally

US markets, following the lead of markets in Asia and Europe, were battered during the lunch hour - usually a relatively quiet time for Wall Street - but staged a remarkable rally to close higher. The Dow, which had been vacillating around the no change line all morning, suddenly fell a full 50 points between 12:00 and 12:15 pm Eastern, with the other indices manifesting similar patterns.

The Dow would soon afterwards drop 130 points into the red, but around 1:00 began on a steady, miracle march higher which appeared out of nowhere, on no news, without reason. The rally led the indices into positive territory, though hardly enough to erase yesterday's battering or economic concerns.

Dow 12,133.40 +57.44; NASDAQ 2,371.74 +21.17; S&P 500 1,387.17 +9.22; NYSE Composite 8,958.60 +31.72

While overall breadth was positive, it was hardly so, with advancing issues beating decliners by about a 5-4 margin. What makes skeptics of analysts are days like today with numbers like this: New highs: 95; new lows: 266. That particular metric, which rolled over into the negative yesterday, is shouting out the direction of this market. Today's suspect rally notwithstanding, the market continues to drift lower as the housing market dries up and the US economy heads into a slow-growth (at best) period.

The sub-prime contagion has spread now into stocks beyond financials. Both H&R Block (HRB) and General Motors (GM) were beaten down early in the day by investors due to exposure concerns. Block, the nation's largest preparer of tax returns, also makes short-term, high-interest loans based on tax refunds while GM announced that they would spend up to $1 billion to cover losses by their part-owned GMAC lending arm.

H&R Block was down more than 1.5 points (>7%), but rallied sharply to end in the green. GM was down 91 cents before recovering to close -.26.

Much of today's trade was based on spin and speculation over the depth of the sub-prime problem, but moreso in anticipation of Friday's quadruple witching day, when index options, stock options, index futures, and single stock futures are set to expire. There was a higher than usual interest in arbitrage of stocks and futures today. Many were caught in a bear trap at midday as stocks sunk, then quickly rallied on short covering. It was a day-trader's day, for sure.

Some traders hunted and bagged what they consider bargains, though coming days may prove they were in the market prematurely. The Dow slipped below 12,000 briefly and that downdraft will no doubt be retested.

Oil bounced around all day, eventually closing up 23 cents to $58.16. Gold lost another 6.90, to end up at 642.50. Silver lost .13 to 12.83. Both precious metals are headed for bargain territory. Silver is just about at its interim support level, and a fall through $12.75 could spark further selling into the $10-12 level; gold may have further to fall, with support in the $600-625 range.

After today's spectacular trading range of nearly 200 points (almost 400 over the last three sessions), just about anything could happen on Thursday and Friday. Stay close to that trade button.