Horny Bulls

The stock market did another one of its levitation acts Thursday, trading higher on low volume and following the lead of the financial sector. The bullish bias was consistent with most days of late, as was the market's tendency to ignore bad news and to latch on to hopeful news. Specifically, the market looked right past the awful initial claims data and the report that mortgage delinquencies hit a record high in the second quarter. Remarkably, 1 out of 8 mortgage loans is either behind in payments or in the foreclosure process.


No matter what happens before Bernanke speaks I will be on the sidelines. I will watch carefully every twitch in the futures market as he speaks. The steroid bulls may try to get this market higher still. The fact that it is options expiration should be a non-event, meaning no extreme volatility, as we might usually expect. Why? Because the last two days have shaken out most of the unwinding. Friday should yield a quiet session, made even quieter by thin summer volume.

In any event, The stock market pushed modestly higher in opening trade as it followed the lead of the overseas indices and disregarded the higher claims data (576K vs. consensus of 550K). The better than expected Philly Fed (+4.2 vs. -2.0) and the fourth positive Leading Indicators report in a row (now highest since 2007) elicited a positive response with new session highs established in mid-morning trade. Limited consolidation near the highs persisted into the afternoon, reflecting continued muted selling interest, with a run to new highs noted in late trade. Sectors strength came from Finance (XLF +2.4%, RKH +2.6%, KBE +2.7%, IAI +1.7%, Insurance +1.7%), REITs IYR +4%, Casino +2.5%, Airline +2.1%, Rail +1.9%, Networking +1.9%, Internet +1.7%, Steel +1.6%, Healthcare +1.5%, Oil Service OIH +1.4%, Housing XHB +1.3%. The limited list of losers included: Biotech -0.5%, Trucking -0.2%, Retail XRT -0.1%.
Market Averages

The rally brings the recent winning streak for the averages to three days but the volume has remained low during what is traditionally near the height of vacation season. It is an option expiration which will lead to a pickup in the pace but does not necessarily mean any substantial prices swings. There is housing data at 10 ET with the recent leading Financial sector a key as a few ETFs (KBE, XLF) are back vacillating near recent range highs. The S&P is facing a solid short term resistance zone in the 1010/1012 area and after a three day run on a summer Friday, it may prove difficult for much near term follow through to develop. Support is at 1003 and the 999/998 area.