Wall Street Strategies

Unlike regular news the folks in the financial news media strive to explain everything.  On Thursday two nut jobs scaled the New York Times building and while we vaguely understand there may have been political motivations for the stunts (one guy was protesting Malaria in Africa, I think) although the first climber more or less climbed the building because it was there.  As I watched the second climb on television there wasn’t a lot of effort to explain why it was happening.  Things are a lot different when it comes to the stock market. The news and explanations go hand and hand.  I’m a contributor to the Fox Business Network each morning and I spend every free moment not on the air trying to figure out why.  The entire team at FBN, including and especially the on air personalities, spends all day trying to understand the reason for not the action itself. 

I’ve written on numerous occasions that this effort by many established financial news source is knee jerk reaction and formulaic.  In short its just plain lam.  I think it’s important to understand this because of the action on Friday.  I would be lying to say I completely understand.  While I’m not as confused as the guy sucked up into a spaceship and probed by curious extra terrestrials.  There is an element of not being able to understand what happened on Friday that made the session crazier as the session moved on.  Let’s face it even crude oil bulls had to blush when crude set a one day price move record on Thursday.

So, when crude took out that record and resistance at $135.00 not only was the price in unknown territory but so too was the would-be explanation.  Part of the reaction was a dramatic shift in emotions as Thursday’s session made it appear to be safe to go back into the water, again. There are several headlines that explain what happened on Friday.  I’ve ranked them in terms of levels of importance but none individually or even in total adequately explain last week.  

I must say that at this point we must all be afraid.  I generally believe that an orderly rise in gas prices has been more a reflection of the success of the economy not a headwind but what we saw last week was anything but orderly.  I don’t know whose pulling the strings behind the scenes but they went for broke.  Maybe they (the string-pullers) know their days are numbered as the political landscape shaping up for the fall is clear.  With the Democratic nomination wrapped up for Obama, Wall Street along with the oil companies, drug companies, Wal-Mart (WMT) and any person making a six figure income are the targets of what will be an incredible movement to somehow punish success and make mediocrity the ultimate virtue.   

Some of the intended victims of this movement are trying to make nice and hoping that maybe the fact they have been job creates, life extenders, innovators that have made life in generally easier, provide the fuel that makes it possible for people to get to work and grandma’s house over the weekend.  Then there are the folks that have manipulated the crude oil market.  Maybe they weighed the pros and cons from their perspective and figured it doesn’t matter now if they play nice so they are going for broke. Obviously what when oil spikes to a one-day record moving up $5.50 its going to grab headlines outside the financial pages.  When it shatters that one-day record by trading up $11.00 the subsequent session it goes beyond the headlines and becomes kerosene for the populist movement to forcible redistribute wealth.  

Right now the calls on crude oil serve as both a catalyst and cover for latest and most outrageous move.  $150 by July 4^th sounds nuts and really is by any measure.  Sure, it could happen, especially not that all the oil bears and shorts have been slain or driven into the hinterlands.  But going there and deserving to be there are two different things to be sure.  The economic and political fallout from last week will reverberate for a long time even if crude prices behave normally and begin to give up ground.  In the meantime the markets are afraid and the masses are going to be burning torches as they head to the ballot box.  I’m a solider for capitalism but I understand the outrages of Main Street there should be an equal or even greater outrage on Wall Street.  Manipulation is part of a lot of facets of life including the stock market but this level of greed is asinine and stupid.  

v     Once regular gas cracked $1.00 a gallon back in April 1999 it took 64 months to clear $2.00.  

v     After cracking $2.00 a gallon in October 2004 regular gas took 31 months to clear the $3.00 a gallon hurdle.  

v     It has been just 12 months since gas has been (mostly) north of $3.00 but at the rate its climbing there is a chance of cracking $4.00 within two weeks.  

Technical View  

The Dow was already operating below all the key moving averages and failed twice (see arrows) to get above them which are generally a major negative.  There is some support around 12,200 but further weakness will have most technicians calling for a re-test of 11,800 on the downside.

What’s Doing?  

Keep an eye on Apple (AAPL) which could make a long awaited announcement on its 3G iPhone.  For a long time the speculation was upbeat but lately there has been some uneasiness the phone will not live up to the hype.