I think the recent market action is due to at least a couple major factors.

• A belief the Fed is on top of this market and the Fed will do whatever is necessary to keep the economy andmore importantly in investors minds the market from cratering.
• The Pols have shown a tendency to throw big billions at every problem.
• In the meantime the money supply as measured by M3 is growing in excess of 20% per year. M3 Of course that's okay because inflation is constrained.
• We are now seeing an influx of stimulus into the economy. First of all Refunds were late because Congress dickered forever over the ATM. Now the Rebates are also arriving. That is a lot of cash hitting consumers and the economy relatively together.
• I think the enhanced consumer spending will improve economic data for a while and the market is reflecting that.

ALL have combined to improve Investors sentiment. Look how small investor sentiment has soared since January. AAII 

Personally I continue to be cautious and sold off part of two of my positions taking profits off the table and I continue to try to get more defensive. UH -- I know you have talked about going to BEARX or GRZZX and while I don't believe the Bulls will prevail in their efforts to claw through this resistance their progreess requires my respect -- for now.

Actually slowly but surely 2008 is turning into a pretty decent investment year -- the averages are deceptive I think.

On the technical trade front, UH's SLW had a good day. FYI --  I'm using a CM0/10 scheme on the trade. I've got a good gain in it thanks to UH. All 9 of their employees must be hitting on all cylinders for us shareholders. I traded the GEX Cup and have a decent gain already. Essentially I just doubled my GEX position on the signal.

In the meantime MOOers have to be happy that the huge farm bill passed with veto-proof majorities in both houses. What ever happened to the Dems commitment to Pay-Go? Anyway lots of taxpayer $$s for fertilizer, seed and tractors. FARM

Finally the last two days have been Omen-free. Close but not quite.

Bythe -- yes we have a confirmed Omen and as I read it the Omen currently is in effect until about July 13. The prophesied decline can start anywhere up to that date. No -- additional Omens do not increase the probability of a severe selloff (as far as I can tell in the literature) but it can and does extend the start of 41 day period. Your calculation is correct and a 10% correction would take us down to roughly retest the January and March lows.

PS -- My computer can't calculate the Omen conditions automatically. I think it is just too scary for it. :-)

Fwiw, I have not bought into bearx or grzzx yet.  As mentioned, the fed and others are standing by to rescue any market, except perhaps commodities, from collapse or even correction.  Consequently I am still waiting for the magic moment when the fed and others might realize that a few points lost on the S&P may very well be better than inflation at some obvious rate.  Speaking about inflation and the CPI, by my calculations, my groceries cost from 1/3 to 1/2 more than they did 6 months ago. 

SLW has a new analyst report today at M*.  Very interesting read.

uh 

Good write-up, DI.  Much appreciated.

I just heard another economist on CNBC Europe this am explaining why it's impossible for the markets to continue to rise.   Credit is tight, corporate profits will be down, and central banks will have to raise rates to fight inflation. "These are toppy markets given the situation", he concluded.

While listening to this very serious and impressive man, I nodded in agreement and watched the DAX tick higher on the top, left-hand corner of the TV screen. Glancing on the charts, I see that the DAX has moved past key resistance near 7100.  Yesterday economists expressed "surprise" about the big German GDP outperformance, but were quick to point out that this growth is unsustainable.  They did admit, however, that corporate investment is strong across the board and muttered something about strong export growth to little countries like China and Russia.

With the DJ Oil & Gas sector closing at all-time highs yesterday, you'd obviously expect the Transports to be in the cellar.  In fact, however, they are aiming to break out over last July's all-time high.

This is obviously a bear market rally, but I now have four funds with double-digit YTD gains.  In addition to the energy sector, the Russia and Brazil indexes have both now hit new all-time highs. 

There is certainly that pesky volume issue on the NYSE.  Yesterday was low again.  Though the NASDAQ did put in above-average volume on yesterday's move up past the 200-day MA to a new Resistance line at 2534.

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On the Nuclear front, Coy at the Vanguard Forum posted an article about a new nuclear ETF.  It's PKN and is based on the World Nuclear Association's Energy Index.  Here's a LINK.  Areva head the list.   PKN is less miner-heavy than NLR.

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Caution is obviously called for.  But you don't necessarily want to taunt the bull either!

One humorous moment did occur yesterday. The Senate voted to close the Enron loophole "in order to dampen speculation in the oil markets". It essentially limited the amount of exposure a speculator could have in any one market.

In reaction the price of oil fell to below $121 -- and stayed there for two minutes before closing essentially unchanged for the day.

Foreign exchanges did well last night with all except a couple Asian markets in the green.  Stock futures are predicting an upbeat open, while TNX has opened with a 3 basis point rise. 

Of interest to those who follow the fundamentals is the announcement by the U N that the growth rate of global production is expected to drop to 1.8% this year.  That would seem to mean a really slow 2nd half for many economies.    

uh

As I previously posted Sentiment of small investors is very positive with 68% of those surveyed being Bullish. (70% is considered dangerously giddy.) AAII

At the same time Consumer Sentiment is the most negative it has been in 16 years with the outlook showing further future declines are expected. CSS

"It was The Best of Times; It was the Worst of Times" -- Dickens.

"That's Just Maddeningly Unhelpful" -- Captain Jack Sparrow

As of now the .SPX seems to be having some trouble holding the 1422 level.

Oil seems to be rocking again for no particular reason except that perhaps a lot of shorts are being covered.  DUG formed an interesting gap down and fill pattern this morning.  Lets see,,, a buy limit at about 27.7???  Would that be teasing a bull???  I could make another 11 cents.

uh

The dollar fell through the floor again, so oil is up on the value preservation trade.  When the dollar bounces, oil will probably go up some more on the expectation of increased US demand.  It's a one-way street, imho.

At one point it'll stop going up - maybe - but who knows when?  DIG gapped up this morning on the sector breakout, so DUG went the other way ...

When I think about all those people who haven't bought cars yet in China ... and about how Petrobras has contracted for virtually every deep water rig on the planet ... I think "bull market".

Congress voted not to continue filling the SPR until the price falls under $75 lol.

The treasurey market seems to be a bit volatile today with the TNX having a 12 or more basis point swing.  It is back to about where it opened now, but the volatility might be having an effect on the USD and commodities.   BTW my limit order for DUG filled at 27.7 and it is already up to 27.82.  Maybe I should be a day trader.....  LOL

uh