The Dow and S&P 500 chalked up lifetime highs for a second day today, and the S&P today also managed to break out above its 1550 area pre-internet-bust intraday high (which had been my upside target for this present market rise). Alas, only the Nasdaq Composite is left behind - just a mere 2334 points away from its pre-internet-bust high.
If the playbook repeats itself again as it did last quarter, stronger than expected earnings are likely to propel the market at least to the point of where gets through the bulk of earnings which would be about a month from now. S&P 1540, to me, now become support. Given the huge amount of short interest in S&P futures, 1580 sure looks like a potentially doable next upside target over the course of the next month or so. All bets are off if the structured credit market melts down further and impacts the overall markets, we attack Iran, or if there is a summer terrorist attack. The Chertoff "gut feeling" remarks were ridiculous, but the repetitive al Zawahri phrases in the latest AQ tape make me wonder.
I chatted with Michael Metz, the chief strategist of Oppenheimer today - a guy who I talk to several times a week, actually. He's one of my favorite market commentators because he;s got the experience and has seen it all. He reminded me that the rise in this market is NOT based on fundamentals, but momentum. He says everyone wants to be in - that nothing has essentially changed from last week scary thoughts on subprime and consumer spending, except that the bears got nervous when the market didn't fall further and the bulls turned exuberant. He also went on to say that it's not just an American phenomenon, but a global craze for stocks over bonds. I think he's right on. There is simply a ton of money on the sidelines and it's being deployed.
Subprime ABX hit all time intraday lows today, GE announced it's closing its subprime mortgage unit, the dollar sank to an all time low for a time vs the euro and government retail sales were well below expectations - but no matter, momo continued and the market went higher.
Some took the speculation of a Warren Buffett purchase of a stake in home builder Hovananian (HOV) has an indication that bottom is in for housing. Not so fast. NFI, CFC, LEND - a variety of lenders did not confirm a bottom is at hand; they struggled today.
The irony of the dollar. It's a fiat currency not backed by anything except what people think it's worth and there has been a big disconnect. The buck hit an all time low vs the euro today, yet it's clear that investors worldwide have been moving into our stock market to buy dollar based stock assets. This is the ultimate example of a fiat currency when the message is 'FOREX be damned', as whole class of investors take matters into their own hands and simply view the dollar slide as a non issue. The old line used to be a 'falling dollar makes U.S. assets look unattractive', but not now - at least for the time being. Even U.S. treasuries managed to bounce off the lows of the past week.