Let's mix in a little "bull".
Yesterday, the Federal Open Market Committee raised interest rates a quarter of a point to 5.25%. Many were worried that the release of its statement might contain verbiage that several more rate hikes were to come. That didn't happen and the markets celebrated. Great!
After the 2:15 EST announcement, the Dow added an additional +133 points to its midday gains of +83, to close up 217 points on the day. The S&P closed up 26.87 to 1272.87, and the NASDAQ jumped 62 points to 2174.40.
The market is following the scenario that we laid out for you a few days ago. We are happy that the market is cooperating with our projections.
So, what do we think is going to happen next?
Earnings season official begins on July 10th, predictions for another rate hike in August are fading, and the market will attempt to force shorts to cover. These events may be enough to trigger a summer rally.
Our initial target for the Dow is 11,300-11,500. We would be lightening our exposure at these levels since we have serious doubts about the market re-testing the 11,670 high's set in May. The S&P may make another attempt at the 1300-1320 level, again we would lighten our exposure even more as it approaches the 1300 mark.
The biggest story of the morning was on GM. It has been reported that Kirk Kerkorian's investment vehicle, Tracinda Corp., that its 13D filing said that "Renault and Nissan are receptive to a partnership with GM that would entail the foreign auto makers taking a 20% stake in the company."
In May of 2005 I said;
"Kirk Kerkorian, the MGM visionary, was once the biggest individual shareholder of Chrysler before the company was sold to Daimler Benz to create DaimlerChrysler. Where others saw disaster, Kerkorian saw opportunity. Kerkorian is smart enough to know that GM virtually comes with the backing of the full faith and credit of the US government. If Chrysler, the #3 automaker could be bailed out with government guarantee's, what about #1? Frankly, I don't think it will come even close to the Chrysler situation, but I do feel a buyout, merger, or takeover by a Japanese (Toyota) automaker is a real possibility."
You can read my May 09, 2005 journal post here: Opportunities Abound
Today, traders are leaving earlier for the long 4th of July weekend.
