A Look at Tuesday’s Market: The overall market moved sharply higher on Tuesday in a broad based move that saw every index I track move higher on the day. I really didn’t see anything to justify the move higher; and in talking to the various market professionals I speak with, and in my review of the market news from our various sources I could not find anything to have sparked the mid-day rally. As one of my friends said, its as if all the quant traders hired the same programmer and they have a heard mentality. In the commodities market, Oil was higher by $1.91 to $88.53 per barrel, and Gold was lower by $23.80 to $1,652.80 per ounce. In the grain market, Wheat was higher by $0.01 to $6.252 per bushel, and Corn was higher by $0.034 to $6.44 er bushel, while Soybeans were lower by $0.022 to $12.506 per bushel.
A Few Thoughts Before the Open: In looking at the charts from yesterday’s trading activity I have the following thoughts and comments.
1. Trading volume continues to be light. This causes me concern over the strength of the rally.
2. Several of the sector indices I am looking at indicate that they could be in the process of breaking out to the upside.
3. This is option’s expiration week. As I have written about in the past, I have seen a common trend of the market reversing its previous trend during options expiration week, and then resuming its prior trend at the start of the new options month. I believe this is a result of traders unwinding their hedged positions prior to expiration. If this is the case, then we could see the market turn back lower next week.
4. In light of CPI data being released this morning which shows year over year inflation at 3.9%, real interest rates are sharply negative.
5. I think the problems in Europe are getting worse, not better.
The Bottom Line: I wish it was different, but it is still a sideways market in my opinion.