Last week, the Dow and the other major averages hardly budged. Yet weekly advances topped declines by 2.5 to 1. This rare divergence is wildly positive for the short term. Combined with the current low level of specialist shorting, it means stocks have a lot of room to move up, and almost no downside risk. So we continue to expect the market will set a new recovery high in the near future.
But, as we say almost every week, this favorable short-term trend will not last forever. As always, we have one eye fixed on the long-term energy trend. And that perspective gives us serious, if not grave, concerns regarding which direction our economy and the world are going.
OIL AT ANY COST
In the previous Market Update, I discussed Chinese oil company CNOOC’s offer to buy Unocal. Several readers took me to task – mistakenly inferring that I thought a Chinese bid should be favored over an American bid. That’s not actually what I meant.
It has been reported that CNOOC is financing its offer with low-interest or interest-free loans from its state-owned parent, the China National Offshore Oil Corporation. If that’s the case, the Chinese are playing unfair, and the deal should not be allowed. CNOOC has requested a review by the U.S. Committee on Foreign Investment, so we’ll see what happens there.Read more...
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