Friday, June 25, 2010

Markets see saw while digesting financial regulation

Dow was hugging break even all day while the the breadth of the market has been stronger. There was a tiny bit of selling into the close. Dow finished down 9, but advancers were 5-2 ahead of decliners & NAZ was up 6. Banks stocks are up because they figure the financial regulation bill is not as bad as it could have been. Well, that's one way to look at it. As with all new legislation (which is NOT final), nobody really knows how it will play out.


Value197.03One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change5.38 (2.8%)

MLPs have been surging all day with the Alerian MLP Index closing up 6 to the 308s (up 5 is a special day for the index). The Dow Jones REIT Index rose 5 to the 199s. Not to be outdone, junk bond funds were up 1-2%, big by their standards. Fears are clearly easing as the VIX fell 1 to 28¾ after topping 30 in the last couple of days. Treasuries also were a little higher as the yield on the 10-year Treasury bond fell 1 basis point to 3.11%, STILL AT A VERY LOW LEVEL!

Alerian MLP Index -- YTD

Dow Jones REIT Index -- YTD


10-Year Treasury Yld Index -- YTD

The threat of a major storm coming to the Gulf brought buyers back to oil. The storm watch is on & especially important for the clean around the oil spill. Oil is heading for its yearly highs around 80. It will very bullish for oil if it can top that level. Gold is not getting as much attention as it deserves but the chart looks very pretty while it's flirting with record levels, few stocks can make that claim!

CLQ10.NYM..Crude Oil Aug 10..78.93 ..Up 2.42

GCM10.CMX..Gold Jun 10..1,255.10 ..Up 9.60

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The Coast Guard said BP (BP) plans next week to nearly double its capacity for siphoning oil gushing from its ruptured deep-sea well, but the threat of a storm raised fears that the effort could be disrupted for days or even weeks. BP said it has paid out $2.4B so far in clean-up & compensation costs for the ecological disaster caused by the worst oil spill in history. This does not include the $20B fund it has agreed to set up, nor the billions it will have to pay in fines (potentially $15B). BP said 2 relief wells that offer the best hope of plugging its well were on track to intercept their target at a depth of 18K feet & they are due to be completed in Aug. A long term chart for BP is shown & is getting ugly. The stock is back to where it was in 1996!

BP --- 3 decades

Stocks were stronger that the Dow suggested. But strength in the stock markets is going on while gold is hovering near record highs & Treasury yields are at very low & troublesome levels. That's called a disconnect. The announcement after the G-20 meeting over the weekend might have a major impact on trading Mon AM. A lack of agreement could be a setback for the markets.

Dow Jones Industrials -- YTD

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