Largest One-day Advance since April 2005 amid Record High Oil Prices. What next?

What a day! The market opened higher on positive inflationary news. The Labor Department reported a modest increase in core prices of 0.1%. The good news continued at 2:00 EST when the FOMC released the minutes of their March 27-28 meeting that stated ”the end of the tightening process was likely to be near, and some members expressed concerns about the dangers of tightening too much, given the lags in the effects of policy.”

As a result of all of the postive news the Dow (DIA) witnessed its biggest one day advance since April 2005. The one bearish aspect of today’s market was the record close of crude oil at $71.35. This could pose (and most likely will) a threat to a sustained rally. There are several other technical indicators that make me wary of a continued advance in the near future. Furthermore, options expiration has a tendency to be quite volatile and the latter part of options expiration has bearish tendencies, especially Friday. I do feel we could see some buyers come in early tomorrow and push the market higher if we receive good inflationary news from the CPI. With the SPY closing near the high of the day we could definitely get a signal in one of our strategies. I can’t wait.

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