All Hat, No Cattle
Research for Online Investors

by John Dalt

1/28/10

We came off great market action yesterday.  The market traded down to minus 90 on the Dow only to rally back and close up 61 on the day.  This was a classic reversal, and all the more impressive as the low of the day was solid support at 1083 on the S&P 500  This morning we found the hat, but no cattle.

We were giddy with excitement this morning for the market to confirm a move higher.  It did not go higher, it sold off, hard.  What happened?  I would like to blame it on the rally killer, Obama.  We had initial jobless claims and durable goods orders reports this morning, and both disappointed the market.  Jobless numbers are higher and durable goods orders were lower than expectations.  No matter how much you talk up the market, there has to be some confirmation.  We didn’t get it.

At mid-day, the market has dropped back down to support, right where we were yesterday at 1080

The crude oil market has always been a stalwart we come back to in the SwingTrader, what is happening now is strange.  Inventories last week were down 3.9 million barrels.  Gasoline built 2 million barrels and distillate’s built 400 thousand barrels.  These last two hurt a little, but bottom line, the crude inventory is falling back in range with past supply.  At these levels, the price ought to be moving higher, and it is not.  We are 3.6% below the crude oil level on hand last year.  Imported crude has averaged 1.5 million barrels less than last year for the past four weeks.  The U.S. dollar continues to show strength.

Watch for oil to move higher on any optimism the economy is recovering.  Watch the dollar, but USO is setting up as a nice trade.

Natural gas storage numbers came out this morning.  Available gas in storage dropped 86 billion cubic feet last week.  This was after the cold weather had loosened its grip on much of the nation.  Where do we go from here?  We think gas is headed higher; cold weather is blowing back into the central region of the country.

You can see storage is in the shaded area.  This is the historical minimum and maximum values over the last five years.  Natural gas storage is 5% above year ago levels, and 3.6% above the five-year historical average.

To the mailbag:
On Fireworks in Washington
I thought your article was right on the money…But, if 62 Million was paid out, how can GS receive 14 Billion?

John’s reply:  Miss-print, bad editing, stupid mistake---please pick one.  I have corrected the original article.  It is BILLIONS in all instances.  Our government does not deal in millions!

On Correction Ahead?
“Attached is a chart (courtesy of Elliotwave.com) comparing the DOW in 2008-now, and 1929-1931 before the bottom dropped out in 31-32  I'm not long any stocks at the moment.  As we saw during the recent collapse from Oct. 08 to March 09, it doesn’t matter what you own as far as quality goes because liquidity is what is important...people even had to sell their gold down to $700 levels because they needed dollars to pay debts/loans/etc.   My neophyte opinion is that the shoe is due to drop at some point here and its going to be worse than 08, just like 31-32 was worse than 29.   Still enjoying the updates -- good hunting!  I have 66 days left on my tour.---Paid up Subscriber Captain from Afghanistan

Which is which, does it matter?

John’s Reply:  The similarity is eerie.  Thanks for sending it.  Thank you for your service.  Good luck to you and your men.  Be safe.  We will watch the calendar for your safe return on April 4th  You, and others, inspire us.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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