The rally in the S&P 500 and the markets is in part due to seasonality, and lower energy prices. Energy prices have been falling due to reduced demand, and warmer than expected temperatures. This condition will not last long.

Yesterday I made a case for owning the natural gas stocks at these levels. This morning, the natural gas market reversed yesterday's decline in overnight trading, basically retracing all of yesterday's loss.

The December natural gas contract is trading at $11.72/mmbtu, up $.34/mmbtu from yesterday's close. Prices are being supported by a stronger cash market and colder temperatures in the Northeast.

OIL

The December futures contract traded below $57/bbl, but have recovered this morning. The current market is $57.70/bbl, down only $.10/bbl from yesterday's close. The weakness in the oil complex is based on high inventory levels and mild weather. Market momentum has been negative since prices have broken through various technical support points.

Our short term target for crude puts support at $55/bbl, and in the spring around $50/bbl.

THE MARKETS

If you have been following our blog, your probably happy with my call on the markets direction. The S&P has jumped 54 points from the October lows, but will run into some pretty strong resistance at the 1250 level.

As temperatures start to cool across the nation, energy prices will begin to stabilize, and so will energy stocks. On the flip side, the S&P's momentum will slow, so if you did not get in the market in October, the advance from here will be more tempered.

IA PORTFOLIO POSITIONS

I am happy to see our stocks advancing sharply during the market rally. Our decision to buy the supercharged Rydex Titan 500 (RYTNX) +4.58% or 68.6% annualized, and the Rydex Velocity Fund (RYVYX) +9.49% or 188.1% annualized has paid off nicely.

Our 3 financials have put on impressive performances. Bank of America (BAC)is up 10% from its October lows, and JP Morgan (JPM) is up 10.4% from our initial purchase. CitiGroup (C) has been a dog. In fact, it will be one of the first stocks I sell as this rally matures.

The portfolio has 1 more pseudo financial/insurance company that has been gradually coming back, American International Group (AIG). Despite their crooked dealings, AIG has been climbing out of the gutter. After the Hank Greenberg & Family debacle, and the lack of cooperation by P&C insurers after the hurricanes, I have grown to really dislike insurance companies. BUT, I cannot ignore the fact that these crooks raise premiums, and fight policy holders who file claims. What a great business, you pay me, but I am not going to pay you. This is just like a casino.

Our 2 retailers have been wonderful. I have seen some insider selling on Best Buy (BBY +9.3%) lately, so I may take profits in a week or two. Wal-Mart (WMT +7%) should do well through Christmas now that fewer people have money after the rise of inflation and energy.

UnitedHealth Group (UNH + 44.6%) continues to be a stellar performer.

Be patient on the energy stocks. Despite the noise, I think colder temperatures will bring higher prices.