Thursday, January 11, 2007

Morning Market Comment 1/11/2007

There is no doubt that the bears are in full control of crude market these days (more on that in a moment) and many commodities, but they have barely been able to make a go of it in the stock market. On the 7th trading day of the month the advantage is swinging slowly back to the bulls. The bearish camp has not been able to take the ball make a break below what had been a six month upward narrow rising channel in the S&P 500. I and pretty much everyone else had pegged that level in the 1407-1408 area as key support in the S&P 0that needs to be carefully watched in S&P 500 cash, along with head and shoulders support in March S&P futures at 1422. Both levels were well defended well by the bulls again yesterday. Before you know it, we'll be the seeing equity only put to call ratios coming out of overbought levels, and what can you say about VIX... it can't rise to save it's life.

But having said all that, the Bank of England surprised with a rate increase and its only a matter of time before the European Central Bank raises. Earlier dollar gains have evaporated and the European rate picture only serves as an reminder concerning the position the dollar is in vis-a-vis the rate increases that are coming overseas vs the rising possibility the Fed will be forced to cut rates here sometime in 2007.

I've got a lot of blogs and sites listed of folks who have some strong views that things might not turn out so lovely in 2007. They're all folks who I believe are on the level and have great integrity - Jim Sinclair, Nouriel Roubini and Michael J. Panzner have very important messages. Here's another name: Federal Reserve Bank of New York President Timothy Geithner. The Wall Street Journal reports he warning that markets are too optimistic on risk (Click Here - subscription required).

Stock futures are modestly lower. Genentech (DNA) posted blow out results, it's shares are up about 2.5% this morning. Score a slight victory for the bulls, but here's an example of expectations built so high - that even with stellar numbers, DNA shares can barely muster a move through what has been rough resistance for the shares.

Cisco sues Apple over the iPhone moniker. As the 1970's Holiday Inn slogan went, "No surprise!" AAPL down less than $1. Steve Jobs will personally call John Chambers, offer the first iPhone off the assembly line, plus a free year's worth of iTunes downloads and they'll have the problem fixed in a jiffy. Actually it will be a bit more complex than that - what with NYU and Columbia bred Silicon Valley lawyers involved - but just a blip on the radar as AAPL roars towards $100.

The picture only gets muddier with respect to Sirius and XM. reports CRTC recommending this 'pair trade':
"The firm recommends going long SIRI and short XMSR as they believe the recent rise in shares of XMSR is primarily due to merger speculation. The firm also believes that the comments from the FCC Chairman yesterday at CES lower the chances of a merger."

Crude oil - last night I discussed not seeing any predictions for a $40 handle in crude. Lo and behold, this morning.. discussions from leading industry newsletters that crude could break $50. Wow. I took a breather from my crude short, will re-enter when it re-probes under $53. It got to as low as $52.95 last night.

Nat Gas - ran into a brick wall up in the $6.70's and is consolidating.... long range forecast models showing potential for a real arctic outbreak.. see DTWXRISK link to your right.

Gold - up to as high as $617 last night basis Feb contract, back at $613 waiting for cues from dollar and oil. I was sitting here last night after the kids went to bed watching the screen for any sort of reax out of crude or oil from President Bush's speech, especially the line about Syria and Iran supply lines. It sounds like we're getting in deeper and it's going to get mroe dangerous in the oil patch of the world, but there was little reaction in gold or crude. As Mr Spock would say, "Fascinating, Captain".

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