This is a very interesting, and potentially important, day. There are a lot of reasons to sell, not a lot of reasons to buy...and the market is rising to the highest levels since January. What is going on?
I have been grousing for the past 24 hours that we have been in a time warp for the past couple days, back to March headlines:
New highs for heating oil, nat gas, oil
Energy, materials outperform
So why are we getting this slow, modest, midday rally? Traders are divided here, but the most common answer I am getting is that traders are getting more comfortable with taking on more risk. There are several reasons for this, but the two most important are a belief that: 1) the U.S. economy will gradually improve in the second half of the year, and 2) the Federal Reserve has essentially provided a backstop with the Bear Stearns bailout.
Both of these are rather bold assumptions, and may prove wrong, but there is clearly a class of traders (a minority, but enough to move the markets: call them "first adopters") who are willing to make the bet here. And you can see it in the VIX: again sitting at the lowest levels since October.
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