Bomb me, bomb me not, bomb me, bomb me not.
Sound like Saddam Hussein mumbling to himself as he hunts for a way to squirm out of another rock and hard place scenario. He needs to be looking for deeper bomb shelter. With Clinton looking for another news event to refocus the eyes of the world on something besides his sexual problems, Saddam picked the wrong time to try and bluff his way to a new agreement.
Only five hours after the new letter agreement was announced the white house labeled it unacceptable. Why not? For the first time in years America has full support of the world partners and the bordering Arab nations. Now is the best time to hold his feet to the fire. The military is in place again. Just like the last several buildup/letdown cycles. Saddam stepped over the line one too many times. Now he is going to pay. Either with bomb damage or a stronger agreement to take his country apart building by building by weapons inspectors.
The Iraq agreement basically was an agreement to have the UN agree to his terms not him agree to the UN terms. Sound familiar?
Why do we care what happens. Personally I don't think this should have any impact on the market at all. There is no trade. Oil prices would welcome the drop in oil production a strike could cause but oil has already blipped because of this. If anything the defense companies would benefit from having to make another few hundred cruise missiles. Hardly a national GDP contribution.
The real crisis as we have been saying is the Fed FOMC meeting on Tuesday. The tide toward a rate cut may have turned and professional traders everywhere are taking positions which will benefit from a market drop. The market has come too far too fast for the Fed chiefs comfort. The froth in the market at this point will be a strong influence on the meeting. The credit spreads Mr Greenspan was worried about last month have improved. The world markets have rallied. Interest around the world have been cut. Brazil got more money than they first expected. There are no fires at present. The urgency for a rate cut is gone. The only reason they will cut now is because of the possible confidence damage if they don't cut. Since Greenspan has never hesitated to talk down markets he thought were overextended in the past, we have no reason to expect him not to take the path of least resistance and do nothing and let the markets settle again. They meet again in December and could cut the rate again then. The world will not be that much closer to a recession that another cut then could not provide the gentle nudge to keep the direction positive.
Don't get me wrong. I am still long term bullish and feel the market will continue on up. If we don't get the cut then we will just back up some and start over again. The rally Friday in the face of the Iraq problem and the FOMC meeting shows the market wants to go up. It just doesn't like surprises.
The positive results for the week included Fridays close at 8919. Breaking the 8900 level again. What had been resistance earlier may have been broken unless we fall back Monday. Other market internals that were negative included the Nasdaq which finished negative on Dell's drop and Internet stock weakness. The worst performer for the week was the Russell-2000. Down everyday the Russell is a leading indicator of possible growing market weakness. On the flip side it has been up strong the last three weeks and could be just profit taking. The bubble theory analysts are making noise again about the speculative excesses in the market and point to the Internet mania as an example. A $9 IPO going to $69 on the first day ! It is only excessive if YOU were not in the group that got to buy it at $9!! I guess that includes me and everybody else I know. The were three million shares offered and 15 million traded so that means each one changed hands five times.
With the on again/off again bombing and the dueling agreements every hour there is no way to forecast what will happen between now and Monday. Wait, watch and listen. The market is news driven and there is no shortage this week.
With this being options expiration week the market bias should be up but wait for the FOMC meeting outcome before going long.
No trades to report today. I did venture back into the market on the PUT side and will report on them when they are closed.