Obviously, we’re watching to see whether hurricane Katrina hits the oil wells in the Gulf of Mexico and causes a spike in oil that damages stock prices. But even if it does, we expect the spike, and the damage, will be short lived, unless it’s accompanied by more serious news.

Most likely, if Katrina hits us below the belt, the President would simply release some oil from our strategic reserves to stabilize prices. No reason to sell.

Despite the sloppy action of the past few weeks, we continue to give the market the benefit of the doubt. There are too many highs or near-highs among the market averages to get too bearish.

Last week, for instance, the relative strength of the broad market hit a new high. Even though all averages were down slightly, the fact that the broad market, the unweighted averages, the small cap stocks held up better than the large caps suggests that the market has not yet peaked.

So we still see only two possibilities. Either the market stays in a trading range, or it goes higher. The only risk would be an unforeseen spike in oil by forces with more muscle than Katrina – forces that could cause a long-term disruption in supply.

Speaking of those forces, have you heard the latest about the Saudis … Read more...