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Dow 12,000 party time, party time, woo woo!!!! Oh, am I late? There is nothing worse than showing up late for a party when all the people are already drunk and overpaying for everything (SanDisk Corp. (NASDAQ:SNDK), Best Buy Co. Inc. (NYSE:BBY), Oil) and all the really great girls (Google Inc. (NASDAQ:GOOG), Apple Computer Inc. (NASDAQ:AAPL)) have already hooked up with investors.

Now is the time to exercise a little caution before we get stuck in a very dull conversation with a "value" company or get into a fight with a rowdy commodity sector that's just trying to impress his hedge fund buddies before they get bored and move on to the next thing (maybe that cute nanotech sitting in the corner!).

Somebody called the cops already and officer Caterpillar Inc. (NYSE:CAT) just showed up and told the kids to keep it down a little. On the other hand Merck & Co. Inc. (NYSE:MRK) just showed up with some profitable new drugs, which might make things interesting...

Finally we will get a good test of the markets resolve, which so far has been unquestioning as it marched towards the 12,000 mark but, now that we have been to the mountaintop, will we be able to go forth into the promised land of 15,000 (still lower than the Nikkei)?

Asia threw their own party and the Nikkei hit 16,651 -- not bad considering that, until just 2 years ago, they tracked neck-to-neck with U.S. indices! Inflation in Europe is causing the ECB to tighten, which will put additional pressure on the Fed to do the same.

The Dow needs to hold its new level in order to make it more than a spike, but it could fall all the way to 11,850 without really showing signs of weakness. The S&P has been edging above 1,365, and it would be very nice if it maintains that level -- or some of our party guests may start heading for the exits. When the S&P goes below 1,350, you will know it is time to go home!

Let's keep our eye on the NYSE today, as a break above 8,700 will bring some fresh blood into the game -- but that's not likely today.

Although they have been a long-term leader, over the past 3 months, the NYSE has fallen behind the other indexes. On the same chart, we can see the Nasdaq has been the clear leader, outpacing the others by 50% since mid-August. So far Nasdaq earnings have been a mixed bag, and this quarter's 300 point gain is looking dangerously like a mountaintop of its own:

Nasdaq Comp 2-month daily 22 10 06

Of course it's the SOX that will determine the movement of the Nasdaq, and they'd better get themselves off the floor before someone calls an ambulance! I don't think SanDisk Corp. (SNDK) was much help, but I've seen some pretty wasted indices recover from worse falls.

Transports got a second wind yesterday with a bounce back from below their 200 DMA, so we'll see if they're ready to party or if they are worried, at this late stage in the evening, about running out of money to buy more oil.

Will oil get a much needed boost from OPEC's 1.2M b/d spare capacity increase, or will it be the cold splash of water traders need to make them realize they've been paying a premium and stocking the fridge full of stuff that turns out to be so plentiful that the manufacturer has to stop the production line before the warehouse gets too full?

At this point the oil sector reminds me of the stores in New York that have "Last Chance -- Going Out of Business" signs up in the window for 20 years. It works for a week or two, but after a while people start just calling it "The Last Chance Store" -- and nobody even goes in to look anymore.

We've been running out of oil since I got my first car almost 30 years ago, and I'm sure when they use hydrogen we'll be running out of that too!

If you want to know what kind of BS OPEC is throwing at you, Indonesia is scheduled to cut 35K b/d, which seems reasonable -- until you realize that Indonesia is a net importer of oil! Are we really expected to believe that they are cutting their own production so they can buy oil at retail from other OPEC members?

Another thing we're not running out of is gold, as the miners have been reporting some great production numbers. Gold is having a terrible time trying to get back over $600 despite the dollar's weakness, but let's keep an eye on copper, gold's ugly sister, who looks about ready to leave the party -- and will certainly drag gold home with it.

There are no picks today; like any smart party guest I will circle the room and try to pick out the cute girls who have not hooked up yet and find out who's actually interesting to talk to, and who's just too drunk on easy money to bother with.

Have fun today -- remember, it's a party!

Read all of Phil Davis's articles on Seeking Alpha.

Source: Options Trader: Friday Morning Ideas