Making Gains Before Earnings

The major indices were more influenced by outside forces today than any great inner impetus. Most traders of individual issues are anxiously awaiting quarterly earnings reports, so the news of the release of the 15 British sailors from Iran came as very welcome news to jittery world-watchers.

When word came that Iran would release the sailors, oil prices slipped more than a dollar, but soon rebounded when US inventories checked in at very low levels. For the day, oil fell 26 cents to close at $64.38.

Gains on the US indices were minimal, following yesterday's dramatic rise. The NASDAQ posted the best percentage gain, 0.34%.

Dow 12,530.05 +19.75; NASDAQ 2,458.69 +8.36; S&P 500 1,439.37 +1.60; NYSE Composite 9,398.56 +17.10

Volume was once again on the light side, with advancing and declining issues nearly even. New highs were heavy for the third straight session at 387, compared to only 58 new lows. This metric continues to indicate a market on the verge of a major breakout. Any solid earnings should propel stocks past their February all-time highs in coming days or weeks.

Since the minor correction of last month, weak hands have been wrung out of this market, though valuations are still on the high side. Most of the best values are likely to be found in the tech sector which has been somewhat battered lately. The net cash outflow from the continuing collapse in housing prices is unlikely to have a serious effect short term, so the market is looking more and more like a well-fueled locomotive ready to embark on a long uphill journey.

Risk in the US markets is all a matter of perspective. While there are still some structural difficulties, there's also a lot to like about US equities, which more and more are becoming globalized, well-branded and acceptable. Money has to go somewhere, and when weighing the choices, the US still has the advantages of stability with growth potential over most of Europe and Japan, and certainly beyond emerging markets in India, China and East Asia.

We may be about to embark on another mid-90s type of bull market, but that kind of run carries the risk of a significant bust at some point, a la 2000-2001. Despite that, most of Wall Street seems to have discounted almost all risk and is ready to buy in with both hands.

Gold and silver were contrarians today, both registering better than 1% gains in value. But, since they've both bounced in a bounded range for nearly a year, there may not be much to it. The metals still look less attractive than stocks in the near term.