Gasóleo sobe 7 cêntimos, gasolina aumenta 2,5 após corte no ISP

[Ulisses Pereira]

"Markets Party, but Commodities Dip Looms"

By Jeff Cooper
Street Insight Contributor
9/18/2006 6:57 AM EDT

"Not all economic news is created equal.

On Friday, the consumer price index came in lower than expected, which played right into the options expiration arbs' hands.

However, for all the early hoopla, the news was pretty much met with sellers as the S&P 500 made a first-hour high. What could have been a super gonzo of a Friday with the bulls pulverizing resistance instead turned into a mild-mannered rally.

The CPI report may have been a more significant catalyst at lower levels in the indices, but few traders were willing to see the report as enough of a reason to throw more money into stocks at resistance.

So, the question becomes, what can the market count on to catapult it through resistance come the coming week's typical options-expiration hangover?

With Friday's options expiration came the unwinding of all those puts bought for a few months out on the heels of the waterfall decline from May and the outbreak of the Israeli/Hezbollah war.

The market has marched up a wall of worry from the June/July lows, shrugging off an approaching hurricane season, $70-plus oil, Mideast war, the Fed and the uncovering of a massive terrorist plot, as well as a sharp break in the housing market -- all as the prospect of the four-year cycle trough this fall approached.

These puts have now expired worthless -- coincident with the evaporation of many of the aforementioned bricks in the wall of worry. The concerns of the summer mirror the recent euphoria.

On Friday, the bulls appear to have squandered the opportunity to capitalize on the lower-than-expected CPI. With the market at an inflection point, it should either blow out to S&P 1340/1350 or roll over. Instead, stocks made a first-hour high on Friday as reflected by the S&P, which left a Lizard sell setup as the index was pinned to the 1320 strike.

That does not mean that it isn't going to try again to go higher in the coming week, but it certainly had an opportunity to do so on Friday. As I see it, there is still a chance for stocks to rally into the coming week, but time is running out if the cluster of cycles that I am looking at is going to bear down.

I say that the market has a chance to rally further because the Dow Jones Industrial Average is so close to a new all-time high that it may get goosed up there to create a headline that drags the public in. Additionally, there is an inverted Head and Shoulders pattern on the S&P, which I mentioned over a month ago, that still projects to 1340 S&P. Thirty years ago in 1976, the Dow bumped its head up against resistance numerous times without being able to break out.



Conclusion: While the market is celebrating the "collapse in oil" and more data that indicate the Fed will remain on hold in the wake of Friday's CPI, the market should also be thinking about whether the weakening commodities reflect slowing global growth or whether the decline in commodities is just the froth coming off speculation.

A funny thing happened on the way to the bank -- while Wall Street and Main Street media were clamoring about the bull market and energy, and while Congress was ready to roast the price-gougers, few were questioning why the majority of oil stocks were refusing to follow oil up for the last few months. What everybody knows is seldom worth betting on. Few ever get very rich following the popular consensus on Wall Street, and right now that popular consensus seems convinced that the market is going materially higher. "

(in www.realmoney.com)