Regaining Ground

 | Sep 27, 2011 | 10:30 AM EDT
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Making back what we lost. That's what's happening.

The selloff last week was an overt disapproval of what Europe was doing. I say overt because is there anything stronger than having almost every world leader and the International Monetary Fund say, "Get your act together, you are killing the world's economy"?

I wonder if Fed chief Ben Bernanke would still include the word "significant" in his statement if he knew that Europe was on a positive course toward resolution.

Of course, there's a caution here. Why should we go above what we lost last week if we are simply taking Lehman off the table? Isn't that what this backstop is about? Isn't there plenty of pain ahead?

I am also focused on the inability of the metals to rally beyond what I think will be a short-covering move. We may be going toward some resolution in Europe, but we still have NO resolution of the inflation issue in China, so a big run in copper seems a little fanciful.

Here's what I think we do: We can rally into the last day of the quarter when the window dressing has tended to disappear, as funds are cautious about marking up.

That means the optimum sale moment would be Thursday. Because of the Jewish holiday, some will have to take that trade Wednesday. Why not take off some and retreat to the dividend payers? We have had a remarkable run in the cyclicals.

I don't trust it. From here you run into China again. You are now factoring in something less than horrid from Europe. But we are not factoring in more of a Chinese slowdown as we go higher.

I want to keep that factored in.

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