Inflation Data

I am more than a little surprised that we rallied on this inflation data that we got this morning. Prices were higher than consensus, and while PPI is not as important as CPI which we get tomorrow, it is still hard to see why the market rallied, unless of course the market was pretty short, having had plenty of time to get that way over the last couple weeks. Strength in the brokers and banks, including a couple sub prime lenders, has aided the bullish tone. Tomorrow is quadruple witching day, so I dont plan to do much today.

Stocks to watch are Goldman Sachs and Citi, (GS C) as tells for where the market is headed. One stock that I am trading today is USG, which I mentioned yesterday as grossly oversold. It has rallied two bucks, a dollar in a few minutes this morning. I would not be surprised to see it test 50 today, and to find buyers in the 48 range if it should sell off, one of which will be me.

Still think this market needs the benefit of time and solid price action to go with it, so in the meantime, I am not "all in" here. We could still easily find that this was a head fake rally, so until we get through tomorrow's volatility, I am going to keep some powder dry.

Gold is finding a bid here and AUY is up 3%. As you know I think the market had this wrong by selling it down, but it will run into some overhead resistance up here I would suspect in the 646 range if we should rally that much.

Meanwhile, I am watching the brokers and the banks for signs that the carnage is over.
Be careful out there.