Markets Move Forward in Cautious Session

With 2nd-quarter corporate earnings reports on the horizon this week (Alcoa announced after the close, posting earnings of 81 cents per share, in line with estimates, but down 4 cents from the same period in 2006), investors took a cautiously-positive tone in a session characterized by sluggish trade and squaring widely-held positions. There was little in the way of speculation, as most of the action over the next few weeks will have earnings as a catalyst.

Dow 13,649.97 +38.29; NASDAQ 2,670.02 +3.51; S&P 500 1,531.85 +1.41; NYSE Composite 10,099.60 +24.21

This is a very heady time for the market and one in which savvy players will make significant plays on stocks. The most animated of the trading will likely be next week, when the bulk of the S&P 500 stocks report and options expire (July 20).

New highs were again well ahead of new lows, 564-100, though advancers and decliners were virtually in a dead heat. Once again, these internals demonstrate that investors are buying stocks that are already showing gains, and shedding losers, though at a reduced rate. We're almost certain to see more of a leveling between the new highs and lows as the quarterlies flow to the market and the media.

With more than 5500 stocks on the NYSE and NASDAQ not represented in the daily high-low numbers, a smart strategy at this juncture would be to go long on companies approaching their 52-week high and either avoid, short-sell or buy puts on those nearing the bottoms of their ranges. You're likely to find winners on both sides of the trade, depending on how much risk you can maintain and how far you wish to spread your money. a few big winners could give the usually pedestrian month of July a bit of luster.

Oil actually fell back a bit today, down 72 cents to $72.19, though it is still extraordinarily high. Oil futures prices have yet to be reflected in pain at the pump, but it's certainly coming, probably right around the time of the Labor Day holiday weekend, which falls on September 1, 2 and 3 this year, coinciding with back-to-school, one of the busiest driving seasons of the year. It hopefully will be Big Oil's last gasp, as the political storm currently percolating in Washington, DC should be blowing its top at that time.

Naturally, politics don't make markets, but some swing in the consensus - especially concerning Iraq - could foment radical changes in corporate governance and oversight down the road. It may be wishful thinking by liberals and free-marketers alike, but change has been in the winds for months. Watch the month of August for signs that the bull is about to wind down or make a significant correction.

Gold and silver made gains today, though they're almost certain to give them back during the course of the week, if not tomorrow.