Tuesday, August 5, 2008


About Shark Watch

Tuesday, August 5 - 4:12 PM

Afternoon Comments

Taking today’s Fed statement in isolation, with all of its talk about credit market woes, housing contraction, elevated energy prices, increasing inflationary expectations and weak economic growth, you’d never think that the market would rally so strongly ahead of and after that news, but that’s exactly what it did. Of course, none of that was any real news, and market players were likely hoping that the Fed would simply stay out of its own way.

Making the action all the more interesting was the fact that, unlike yesterday, the pullback in oil and strength in the greenback triggered some heavy buying. However, the leader/laggard relationship we saw yesterday, with energy and materials acting poorly and financials and consumer discretionary leading, did carry over. Moreover, traditional defensive names like WMT, JNJ and MCD broke to fresh highs. If one theme is developing, then it seems to be that money is flowing out of commodity-related plays and into more defensive areas.

Regardless, the bulls are having their day. They’ve been able to step up before the averages really tested short-term support. However, overhead resistance is looming once again, and it remains to be seen if they have what it takes to move us past those levels this time around.

Meanwhile, we have earnings reports due out from CSCO this evening and FRE and AIG tomorrow. The confidence with which buyers pushed the market higher today was notable, and we’ll have to see if those numbers will help them keep things going.

Have a great evening and we will see you tomorrow.

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