Rally doesn’t blow anyone away, but it just keeps on moving.

It was more of the same.  More worries about the Middle East unrest spreading and more Chinese data.  The result was the same, however: a soft start followed by a recovery to the upside as the indices, all except the Dow, extended their gains.  Moreover, the small caps and growth indices performed better, adding a little extra encouragement to the move.

The day was no blowout in and of itself, but it added to the continued rally, and the low to high action again shows buyers, even if a bit more timid, moving into stocks. 

Bahrain was the news headliner as the Tunisian/Egyptian unrest popped up in a new area.  Tear gas and rubber bullets met protestors.  Iran applauded the Tunisian and Egyptian actions as well as uprisings spreading elsewhere, even as it crushed a new uprising within its own borders.  Iran loves unrest elsewhere because it is an opportunity to spread its agenda throughout the region.

As worrisome as this patchwork of unrest is, some positive news from China proved stronger.  China reported exports up 38%, much more than expected.  On top of that there were rumors that China’s CPI will be less than expected.  Don’t need Charlie Chan to figure out where this rumor is coming from.  In any event while futures were sluggish, the Middle Eastern worries gave way to China’s continued solid economy and the continued hope that the US data will get better.  After all, the President was releasing his tough on spending budget later in the day and surely, surely we have come to our senses and are going to cut spending, reduce the size of government, reduce regulations, and again empower the American entrepreneur.  As the Oak Ridge Boys sang, ‘Dream On.’

The economic data cranks back up Tuesday with the January retail sales and February New York PMI.  Further, the market has to deal with a disappointing warning from FDX about the current quarter coming in way light (0.70 – 0.90 versus 0.95 – 1.15 expected), and that had futures significantly lower after hours.  Significantly may be a stretch.  Even if they open lower, where they are trading means SP500 still opens above the 10 day EMA.  As we have seen of late, the 10 day EMA has been the limit of the SP500′s tests. 

Still, it is a ‘what have you done for me lately’ market as always.  UPS’ great results and guidance are quickly forgotten as FDX uses the ‘it was the storms’ and ‘it is because of high fuel’ built in excuses to sandbag guidance.  Do you think that people who have to send a package are not going to still send that package when every shipper was struggling?  Of course they will be shipped and it won’t be next quarter the package is shipped.  Further, what about those damnable ‘fuel surcharges’ all the shippers are charging?  You think THEY are paying for the shipping?  Hell no.  Those shipping are paying for it.

Of course it only takes one time to break the streak and as I have discussed seemingly without pause the past couple of weeks, this rally is extended, is equivalent of the prior move, has key leaders stretched, blah, blah, blah.  There are also stocks that continue to get new money and set up for new upside moves.  That has been the market’s story for the past several weeks.

As I said over the weekend, quoting Kevin Costner in ‘Tin Cup,’ you rider her ’til she bucks you.’  Even then, however, you take precautions just as a sailor on shore leave in a foreign port of call.  Our version: play stocks with good risk/reward potential, keep stops decent on current positions as we have gain built into many (and have already taken gain on many as well), and take some partial gain when it presents itself (i.e. when a target it is hit or a stock shows it is capping out on a run) because at any point this market could turn.

There are still buys out there; we saw several on Monday.  We will keep looking but also keep looking for ‘in your ear’ as well.