Is the Top In?

The holidays over, we step into markets this morning with an interesting divergence to consider in markets.

Looking at the preopen, we saw the Dow futures were down about 27 points and the S&P was also sporting the seasonal red, missing during the Santa Rally.

What makes this so interesting is that there are some questions to be asked about the underlying assumptions about inflation.  Oil, for example is down about 70-cents.  And gold and silver are showing some very nice gains.  But, conversely, the bond yields look to be down. 

Even stranger?  The purchasing power of the dollar is getting stronger this morning.

Now, this is the kind of discontinuity that makes me nuts.  What it seems to tell us is that the market yields are coming down…again.  As this happens, it may signal the “recovery” clogging up a bit (which would explain a drop in oil demand, hence price) and it would also explain the drop in bonds.

In an odd way, the price of the metals may be going up because the carrying costs of those using the gold and silver as a kind of carry-trade vehicle, can afford (at low rates) to salt away more metals holdings.

What does it mean?

Could be a soft day early on, but seems to me that with interest rates holding lower, the comparative value of stocks could be setting up for one more run to the upside.

And that answers (and this is NOT INVESTMENT ADVICE) the question “Is the top in?”

Judging by this morning’s set-up?

No…but it wouldn’t be the first time I’ve been wrong…but the set up is what I’d expect with a market planning to move higher.  Today’s trading (and tomorrows) will be New Years positioning…but another run up  (Dow 17,260?) may be in the cards in coming weeks.

(I apologize for so many posts, we’ll be back on our main two posts diet tomorrow morning when I haven’t been up all night…)

Notice how it feels like we’re getting two Mondays this week?