Equities Maintain Positive Bias

For all the recent talk about the current rally being overextended, there doesn't seem to be much of a rush to sell stocks, which is probably why so many analysts are urging caution. Their hypothesis is that it would be better to take money off the table now, while stocks are still relatively overpriced, than later, when they will probably have fallen 5-10%.

However, with the panic of '08 a fast-fading memory, there is always the possibility that many investors, small and large alike, have taken positions in stocks when they were very cheap just a few months ago, and are probably not in any hurry to sell. After all, that's what the professionals tell us to do: buy, hold and prosper.

That strategy may be a sound one at this juncture. The heyday of day-trading is long past and your average 401k type is not going to be moving money around willy-nilly. Neither are heady fund managers, many of whom were burned badly in the last debacle. The slaughter that began in September 2008 (actually, the slide started in August of 2007) and ended abruptly on March 9, 2009, may have lodged itself firmly in the craniums of the top fund managers. And while they may be quicker on the trigger if things start slipping again, they're seasoned enough to recognize a fundamentally strong market when they see one. A 5-10% correction is not going to move them much, if at all.

The day began with some very ugly retail sales figures for the month of July, with an overall number of -0.1%, and -0.6% ex-autos. The "cash for clunkers" promotion by the government was such a hit that it had to be re-funded by congress, but while people were busy, out buying new cars, they apparently forgot to purchase clothes, batteries, food and other consumables. The numbers reflected the thinking of many who believe that the economy is still not on solid recovery ground, and they may be right, though there's enough activity to believe that the worst is behind us.

The retail sales figures knocked the starch out of stocks at the open, but they quickly rebounded and stayed mostly positive for the remainder of the session, adding another leg to yesterday's rally.

Dow 9,398.19, +36.58 (0.39%)
NASDAQ 2,009.35, +10.63 (0.53%)
S&P 500 1,012.73, +6.92 (0.69%)
NYSE Composite 6,604.10, +65.23 (1.00%)

Advancers were solidly ahead of declining issues, 3987-2444. New highs outpaced new lows, 157-54, and volume was moderate, though the NYSE was very quiet. The day's trading was not very volatile, but the positive tone bodes well for the future, though a slight correction, which everybody under the sun seems to be calling for, would not be a surprise. There still could be more upside before any major bout of profit-taking occurs, since the news flow has been generally good and earnings season is well past.

NYSE Volume 913,417,000
NASDAQ Volume 2,117,709,000

Commodities were mixed, though oil gained 36 cents, to finish the day at $70.52. Gold was up $4.00, to $956.50, while silver was the big winner, gaining 40 cents to $14.99.

Tomorrow morning's CPI report is not likely to cause any consternation in the markets because it will be a rather benign number.