Stock Market Looking Perky

Overseas markets were mixed and this mornings U.S. Futures were indicating that a relief bounce is in order. The U.S. Current Account deficit came in larger than expected at -$195.7b versus -$191b consensus which points to more signs of inflation. Oil is looking lower and Gold continues to march upward. Michigan Consumer Sentiment numbers were released at 76.9 well below expectations of 84, which isn't shocking considering current events.

The stock market feels Spikey to the upside this morning as we had predicted yesterday. The breadth is positive but Semiconductors seem to be lagging despite an Intel (INTC) upgrade from CSFB. Options expiration today is probably keeping some of the bid under the market.

We expect a little more buoyancy between now and Tuesday afternoon, when the Federal Reserve meets. We have covered all of our NASDAQ 100 (QQQQ) shorts and have even thrown in one arm to the long-side which now places us around 44% invested. This long-side exposure is very temporary and we will not hesitate to stop out quickly.

Gold continues to defy gravity. Fundamentally stock market participants need to be aware of what it is telling us. Clearly deficit concerns are becoming problematic. President Bush, in his speech last night outlined the most shocking spending program since Franklin Delano Roosevelt. If the GOP has their way, the combination of Iraq, New Orleans, and Tax Cuts, will create the largest deficits in decades. The inflation and interest rate implications are ominous. More on the politics later.

Kcap be nimble Kcap be quick, we've just gone long for a quick intraday flip.

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