Stocks in New York had a nice bounce today and rose 5% on optimism that some kind of revised bailout bill will pass later this week. The Dow closed at 10,850 and the S&P ended the day at 1164.
The extent of these gains were somewhat surprising, but the comeback is largely in keeping with my forecast for a rally later on in the week. The Senate is going to reconvene tomorrow to vote on a revised bill and this should extend the rally well over 11,000. We are in good shape for highs above 11,300 by Thursday, and if all goes well, perhaps even to our original target of 11,700. I am still thinking the terrain may shift Friday in advance of a difficult or even cataclysmic week next week so long positions here need to be handled with care.
Oil came back after Monday's record sell off and closed above $100. Although I was not specific in calling for yesterday's precipitous decline, I have forecast a positive week for crude, so let's see how high it can go in these relief rallies today and tomorrow. $110 may be a stretch, but $105 is very possible.
Not surprisingly, gold slumped back to $886 today as investors breathed a sigh of relief and no longer sought out the safe haven metal. Look for prices to drop further here, perhaps to $850 before recovering.
Mumbai and other Asian markets were surprisingly strong and rose 2% as the Sensex closed at 12,860 and the Nifty at 3921. 4000 on the Nifty is quite likely this week, with an outside chance at 4100, but it is unlikely to hold next week as we move down again.
The Euro plummeted over 3 cents yesterday down to 1.40, well in excess of our target of 1.42. There's more downside there this week and it may test 1.38 at some point.
