Wednesday, February 06, 2008

Disney Propels The Dow Higher

The markets got a small bounce at the open, and have since built on those gains. The Dow has been up as much as +100 points after Disney (DIS) reported strong earnings. Tonight after the close, Cisco (CSCO) reports earnings, which should color the action in the Nasdaq tomorrow.

The exchange stocks (CME, NMX, ICE) are lower after the Dept. of Justice is complaining that the combination of futures exchanges controlling their own clearing functions has thwarted competition. I don't buy their argument, and if the exchanges hadn't gone public recently, I don't think this would have ever come up.

Asian markets got whacked overnight, following the drubbing on Wall St. Japan fell -4.7%, while Hong Kong swooned -5.4%. I added a hedge yesterday in the form of an inverse ETF on emerging markets (EEV).

Bond yields are steady, with the 10-year yield at 3.61%. It has found good support around this level over the last week or so, which is a good sign.

Oil inventories rose again, pushing crude prices lower (near $87.50). Pull up a chart of the oil ETF (USO) and you'll see a fairly negative picture. As such, it looks like oil could continue lower in the near-term.

This bounce looks small in comparison to yesterday's decline. I don't know if a retest of the lows is imminent, but it seems the market has more work to do before its ready for a more sustainable rally.

The market had also become very overbought (stochastics, oscillators), so we'll have to see how it holds up once that overbought condition is alleviated.

long EEV


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