Last week, I suggested that the unbelievable CPI report was no good reason to buy stocks but that traders would exploit it and any other bullish spinning opportunity to push the market higher. This Monday, I wrote that sooner or later insensitivity to high oil prices would catch up with us. I just wasn’t sure it would happen so soon.
Sometimes the market moves in one direction or the other on news that is either flawed and misleading or news that has been known or should have been known for a long time. We have two down days, albeit big ones, and the bulls are shaking. After two months of rallying, it was getting a little sickening to hear all the overconfidence that was boiling over at the end of last week. So it really isn’t impressive to see the whining going on.
It’s as if the PPI data was a shock. Inflation? Really? If you didn’t believe we had inflationary forces until now, why would this PPI report change anything? No good reason. Oil is high!!! Really? If you didn’t care that oil was a threat to business profits and consumer spending when oil ended last week in the high $120’s, why would oil in the low $130’s per barrel change anything now? No good reason. Boone Pickens said oil would hit $150 this year on CNBC on Tuesday. I’ve heard how this pronouncement set bad things in motion with oil prices and the stock market’s negative reaction. Really? He said the same thing on April 29th on Bloomberg, so why would his same comment this week change anything now? No good reason. The FOMC minutes suggested that the last rate cut was a tough call and that they were likely on hold for a while. Really? We knew that already and from all the Fedspeak that’s been going on in the past week preparing us for the minutes, why would this change anything now? No good reason. As for the downward revisions on the economy and employment - none of this should have been a surprise.
Over the past two weeks, I heard quite a few technicians suggesting that we had solidly broken through prior resistance at 1400 and it was onward and upward from here. Now that we are below 1400, does that mean support failed? It was too early to suggest bullish technicals last week and it is too early to suggest bad technicals now. As you may know, I am not a big believer in technical analysis of index charts.
Stocks can go up for no good reason. Stocks can go down for no good reason.