The U.S. market indices finished mixed yesterday, with the DJIA briefly flirting with the 13,000 mark. CNBC insisted on talking about that level all day long on every segment as if breaching that level will cure all cancers and bring forth peace and happiness for the entire universe. As I have to do all too often, the TV was muted so I could maintain my sanity.
Greece got another reprieve as they agreed to yet another bailout from the Euro zone on Monday. The can kicking continues with excess levels of sovereign debt on a global basis. It is what it is and we must trade what is in front of us. But it's not a sustainable situation over the longer term, in my opinion.
Of note was the weak action in the transports as the rise in price of oil persists with the price now over $105/bbl. Last night on CNBC's The Kudlow Report, Zach Karabell who is a Fast Money contributor was asked if $4.50/gal gasoline would have a negative effect on GDP. His response surprised me as he posited that as long as gas at the pump rises slowly, that GDP would not be adversely effected, even if it were to rise to $4.50 in the next 6 months. That would represent roughly a 20% rise from the current national average of $3.75/gallon.
To his credit he responded to me after I questioned him on Twitter. His view is that companies have not been able to pass along price increases and have instead decreased their costs through increased efficiency and cutting labor costs. That said, I do not agree with his view. I think a quick rise in gas prices would put a serious crimp on consumer spending and adversely affect GDP.
During this straight line advance in the markets over the last 9 weeks, every time it looks like we're about to see follow through on weakness, the market has a big up day to smash the bears. So for now, the bias must remain to the upside (buy the dips) until we see important market leaders display more weakness.
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