Obviously the "short stocks/long oil" trade continued to unwind today. The market just seemed to float higher during the day as oil kept falling. Now it's almost like the early August drop never happened -- the S&P 500 and Dow are now up slightly for the month of August, while the NASDAQ is still down about 1.4%. The Dow is actually looking the strongest to me since it has taken out its early August high, which gives it the first higher high, on a closing basis, since June. Also of note is that the Dow closed above its 50-day moving average and the S&P 500 closed just a hair (less than 0.25 points) under its 50 DMA.
Briefing.com posted some thoughts on the current market action that are worth considering:
Floor Talk IIIn talking with some of our institutional contacts, the feeling is that the high beta sectors are finding interest here based on magnitude of decline. Desks also paying attention to the cash building up the sidelines, and think market will be propelled by short-covering as money is put to work. The key question is when exactly accounts will come back into the market. Some suggest that we won't see any real sponsorship until after Sept 11th anniversary. At this point, portfolio managers will be looking to move from an underinvested position with hopes of participating in the traditionally strong back half of the year.
It's that 'the buyers are higher' theory again.
