10.09.09

10.09.09

           Some late buying helped the stock market finish the Friday session at its high point for its fifth straight gain. What's more, stocks racked up a weekly gain of 4.5%, which is the best weekly market performance since July.  Unlike recent sessions, Friday’s advance came in the face of a stronger U.S. dollar, which gained 0.6% against a basket of major foreign currencies after Fed Chairman Bernanke said that the Fed can't indefinitely continue its policy accommodation for fear of triggering inflationary pressure. The statement wasn't anything new, but it was enough to lend support in the context of the dollar's recent doldrums. The dollar's strength did threaten to undercut stocks midsession, but the broader market garnered support as the S&P 500 slipped toward the neutral line. Strength in the dollar did undercut precious metals prices. Crude oil futures however were able to break free from the dollar's hold. Oil prices had been down more than 1% in the early going, but recovered to settle with a fractional gain at $71.93 per barrel. Natural gas prices weren't so fortunate; they closed down 4.0% at $4.77 per contract, near session lows.

For the week: It was a super up-week, after two straight down weeks, that has major indexes almost back to their levels of four weeks ago, (the Dow actually at a fractional new high for the year) where they will either break out to new highs or fall back, leaving a potential short-term double-top in place.

          Next week is the month’s options expirations week (expirations taking place on Friday). Normally the week before the options expirations week tends to be down, as the big program-trading firms drive the market down so they can buy futures and call options that will expire the next week for pennies on the dollar. Then they drive the market back up in the expirations week to reap big profits on those futures and options they bought for pennies on the dollar. But when the week before the expirations week is positive, which this week certainly was, there is no historical pattern for the options expirations week.

          By the way, with the cost of the stimulus efforts estimated to be $3.2 trillion, this year’s federal budget deficit is estimated to reach $1.4 trillion, total consumer debt is reported to be $2.46 trillion, etc. Have you noticed that a lot of areas have moved out of the categories of $billions and into $trillions? If you have as much trouble as I do in grasping the difference, mathematician John Allen Paulos puts it this way; “A million seconds is 11.5 days. A billion seconds is about 32 years. A trillion seconds is 32,000 years.”

          A new earnings season starts this week with the big financial firms including J.P. Morgan Chase, Goldman Sachs, Bank of America, and Citigroup due to report. It was their reports three months ago, and the hyping of them, that halted the four week market decline that took place from mid-June to mid-July, and launched the market into the spike-up of the last three months. What the street wants to see this time around is improvement to the top line from increasing sales instead of it coming from cost cutting as happened in July.