ALLIGATOR TRADE

Markets have dipped lower on the heels of crummy guidance from PG and a stock buyback announcement by IBM. Of course one item is bearish and one bullish so take your pick.

Sectors doing best include METALS, biotechs, oils, oils service, semis, tech and financials. To the downside, trannies, airlines, drugs, retail, small caps and cyclicals.

Market internal a negative 850, which is crummy but certaintly not extremely bearish.

On the bright side, the 2 day RSI is finally giving some buy signals for the major indexes. We have the DJIA at 9 and the SPX at 21.

Note also the outperformance of the Financials, SEMIS and TECH. Generally if they hang green it won't be long before the rest of the markets rebound; I expect that tomorrow as the beginning of the month money comes in to drive prices back up.

While the DJIA/SPX complex is sinking today, the 10 year BOND rate has dipped back to the 4.61% area. Of course as rates fall, the value of equities should rise as the P/E should expand and companies get cheaper borrowing costs and that should add to the bottom line.

The asset alligator trade should also kick in as those holding bonds sell and switch or allocate more money to equities and lock in the bond gains.

The flip side is that the economy is weakening and folks are willing to pay higher prices for bonds and the sure thing of interest paid by the government of the U.S.A.