Looking for the Followup

All strong rallies begin with a higher volume upside trading day and then are later followed by another confirmation day. Will today provide that confirmation? There is at least a chance that it will. If the bulls fail to take advantage of this opportunity, it will be a clear sign that we've failed to put in a tradeable bottom.

Here is why. First, the Russian oil crisis has abated to some extent after Russia's Justice Ministry said Yukos Oil, the country's largest exporter, can keep producing and selling. This is important since the company pumps nearly 2% of the world's crude. Second, there were a number of solid earnings reports last night - some examples include INSP, JDSU, SONSE, XOM, SHPGF, ALDA, SOHU, ONNN, NANO, CNCT, GIVEN, & SBL. Sure there were some disappointments, like WFMI, TARO, ESST, ZMH, & CCE, but in general the reports were bullish. And, finally, the economic reports of the day - the employment cost index and initial claims both came inline with expectations.

Beyond those market headlines, from watching the Democratic convention, reading the reaction of the press, and talking to investors on both sides of the spectrum, I'm getting a general sense that while Wall Street doesn't like the idea of John Kerry taking the presidency, I believe there is a real chance they are starting to feel more comfortable about the possibility of change in leadership. I could be wrong, but generally I don't think people fear that change as much as they did only a few months ago.

And, finally, every day I hear at least one statistic that either suggests why now is a good buying or selling opportunity. Today's factoid is has a bullish slant - since 1964, the S&P 500 has never seen negative returns between the end of May and the end of September in an election year. The average gain is 4.6% and the S&P 500 is currently down 3% from the end of May. Just something to think about as we watch the developments today.