I'm in the Mood for a Parade!

Break out the boiled peanuts and cotton candy. Grab a lawn chair and some sunscreen-it's time for a parade! Or maybe it is just election season. I say this sarcastically of course, in case it doesn't come through in print. At the old age of 34 I'm already feeling quite cantankerous. I suspect it helps when picking short plays. In any case, I listened to a little radio tonight-a pass time that I've just about all but given up on. There are no more Jim Croce types-James Blunt will have to do or silence-which isn't bad either-again I digress. So, like I was saying-I listened to some radio tonight and damned if a parade wasn't coming to town. There was talk about the falling oil/gas prices, talk of the Dow hitting all time highs, talk of low inflation, talk of housing starts coming in stronger than expected, soft landings, blah, blah, blah! I like to think of myself as a glass is half full kinda guy, but I know that's just probably wishful thinking. Truth be known-I'm suspicious by nature. I'm the devil's advocate, some even say I'm conspiracy minded. The fact is, I've never trusted the talking heads and I'm not one to just jump on the conga line, unless I find myself trapped between two...ah that's just talk too-I love my wife. But seriously, all this talk is making me nauseous. Lets break it down.

Lets start with falling oil prices, and again this may just be my suspicious, conspiratorial mind at work, but does it strike anyone else as being a bit obvious that the House of Representatives and the Senate have some key races that could shift the balance of power away from the incumbents? Perhaps lower gas prices in the months leading up to the elections will be all the difference in a tight race. Elections are about mobilizing the base, and lets face it-who's more likely to be driving a big gas guzzling SUV-a tree hugging, bleeding heart liberal or a gun rack toting, 4-wheelin' Republican? If I remember correctly, oil was in the low 20's when Bush came into office, I'm not knocking him, if he were a corn farmer, I'd expect to be paying $12 for an ear of corn, it's just the reality of the lobby in Washington and who's in power. The point is, after the elections, of course with a little grace period to save face, I fully expect to see oil back up for the remainder of this administration.

As for the Dow hitting all time highs, it's fluff! Look, the market has been doing great, but the recent run-up has done little more than fulfill the average summer rally. It hasn't been excitingly strong and there are a lot of indicators that are divergent and suggest a day of reckoning is on the way. Not enough evidence to rain on the parade? Take a look at the Nasdaq, it would need to more than double to make new highs. That is a lack of confirmation and doesn't bode well for the perma-bulls cheerleading squad. New highs are a certainty, however, they are being given a lot more credit than they are due. Mark my words, if we get new highs soon, this market will have a deep pullback that'll have all those talking heads crying about the sky falling.

As for inflation, I and others have noted the excessive enthusiasm that has been apparent in the market. Lest we forget that the last two rate halts haven't been unanimous, there was dissent in both cases. Just today we heard Federal Reserve Governor Randall Kroszner warn about the potential for continued inflationary pressures. I think the likelihood is, we have turned a corner, but we don't have that many miles under the belt to go out and start prognosticating about inflation being under control. The Fed members that have broke in dissent probably have a better understanding of the risks than do the radio talk show hosts.

Here's my favorite of the bunch-better than expected New Home Sales. New Home Sales came in today up 4.1% If you listened to the pundits tonight, you'd think there was a revival in housing. Perhaps you'd even be tempted to call your realtor and tell them the deal you just signed to sell your house is off-you want top dollar! Whoooaaa, hold on just a second, did the pundits mention that part of the reason the number came in as the strongest increase since March was due to the fact that the prior 3 months were revised down?

So, don't be fooled by the rosy atmosphere being portrayed in the media. New highs in the Dow is not insignificant, it will help to bring retail customers back into the market, they've been away for a long time now. As I mentioned earlier, we are off to an encouraging start on the inflation front, but we aren't out of the woods. Falling gas prices are significant and helpful to the economy, but they will also weigh on the market as energy is a leading engine that has driven the S&P 500 and sooner or later, OPEC will step in to protect their asset. Many of the governments in the Middle East are in economic crisis of their own and they won't tolerate too much more without taking steps to ratchet down supply. So, all the same, I think I'll skip the parade.

Now, for what matters to us-RIO us doing it's thing, the move today wasn't unexpected and isn't technically significant. The down trend there is still very much in effect and I think it's just a matter of time before it heads in the direction that the chart suggests is coming. FLOW isn't causing me to lose any sleep either. As for SLXA, I made a pretty strong case recently (I thought) that the dip below the lower trend line was just a shakeout that would precede a breakout to the upside. Technically speaking we saw that breakout today. No parade here either though. I'm not concerned about the relative lack of volume...yet, but it needs to see a day or two of confirmation and rising volume might very well have me working on a float for the parade. SUPG had the breakout from the bull flag that I've been expecting-I hope you caught that one Chelobes. JOYG also had another decent day, you may recall that I said earlier on the week, a lot of good moves come off an apparent breakdown of a base (shakeout) so keep an eye on JOYG. THOR is looking better and better. As for all the metal/mining stocks, earlier in the week I thought they looked ready to rally off that oversold condition on the charts, I think the oversold condition is pretty well unwound at this point. That doesn't mean we won't see some irrationality, but I actually feel better about RIO having worked it off. As for ideas beyond what is here, I don't have anymore. I dumped a ton of ideas on you earlier in the week and most still look appealing. So, enjoy your little Friday and hopefully make some money.