Bears and Media Have Chutzpah

You have to be impressed with the chutzpah of the Bears today. The Bulls (Kcap included) were "high hoofing" all weekend long in anticipation of a breakout rally due to the not so bad and ugly storm we call Rita. Stock market Bulls expected Oil to hit the $62 price point and threaten to go through that key support level. The underlying bid in the stock market due to quarter end markups would have then taken over creating a beautiful spike, leading to even more horniness by the Bulls. However, the Bears would have none of that and pulled the rug out from the Bulls when the media started reporting contradicting information on oil rig damage from the storm.

Unfortunately, Rita, who was once the girl that nobody wanted to date and then showed up after a long absence (looking 30lbs thinner with implants), fooled the Bulls yet again by revealing that she had a long list of STD's. This only after traders tripped over themselves to get the first date. More precisely our analogy and frustration is with the media. First the media scared the daylights out of traders last week, warning them of energy disruptions for months or possibly years to come due to Rita. Next the media told us that the Oil infrastructure was left relatively unscathed after Rita passed by in a rather less ferocious manor. Then two and a half days after the storm the media informs us that Rita possibly was more gruesome after all. The zeal to put out real-time information continues to sacrifice quality.

While the Bulls are certainly disappointed (Kcap included) that the rug was pulled out from underneath, we are happy that no serious stock market damage has been done. The Bears did not bring the averages down to low enough levels to interrupt the most recent uptrend that started Thursday. The internals of the stock market were still solid with positive breadth on both the NYSE and the NASDAQ. High beta stocks that have been under significant pressure in the past few weeks staged sharp rebounds i.e. CMGI Inc. (CMGI) and Ciena (CIEN). The Small Cap sector also seemed to want to go higher but was held back from the above Oil concerns. However, Semiconductors were feeling a little heavy due to the underperformance from Intel (INTC)

If You Held a Taser to Our Head:
Both Bulls and Bears are putting up an impressive fight and creating decent volatility. As we approach the end of the week, money managers will experience more performance anxiety. Ultimately quarter end mark-ups and window dressing may prove to be too much for the Bears to pull another rabbit out of their hat. We are maintaining our 70% exposure to the stock market for the time being. Who knows…maybe the media is already working on revising the most recent news from the Gulf…yet again.

See you tomorrow.

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