The markets are enjoying another strong rally today, driven by a possible floor in housing sales and rumors that the Fed may start to purchase poorly performing mortgage loans rather than simply accept them on REPO. 

But the biggest news today, following Easter Sunday, may be Bear Stearns, whose stock price has arisen from the ashes on news that JP Morgan will be upping its offer from $2 to $10 per share.  With the stock now trading at $13, up 120% on the day, there are clearly those who believe that the company’s sacrifice last week may be up for further negotiation.  I’m hoping this is good news for Joe Baudo, our friend and salesman at Bear Stearns.       

The pullback in materials and energy names from last week has abated somewhat, with both sectors up today.  A strategist we follow commented this morning that energy stock prices support $70 oil, suggesting further downside in the short run for the commodity itself.  At this point, our view is that the short term froth will likely continue to come out of commodities, but that the long term uptrend will likely remain intact given emerging economy demands.  I haven’t looked yet to see, but would guess that $70 oil wouldn’t violate the long term positive trend given the parabolic short term move it experienced to $110.    

Consumer discretionary and technology names are leading the markets higher, while some of the classic defensive sectors — consumer staples, health care and utilities — are lagging.  While it has only be a few days, the action has started to put a positive shine on most technical indicators, suggesting that our contrarian call from ten days ago urging investors to think more about offense may be set to bear continued fruit.  For more specific details on the gameplan we’re using, see last week’s update, What’s an Investor to Do?

Of course, only time will tell if we’re right.  But it sure feels good. 

If we can help, please let us know!