Market Rally for Real? Too Soon to Say

Oil Is Down But Not Out

Stay Careful with the Financials

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Want to avoid direct communication? A new technology, aptly called Slydial, allows you to jump directly to phone voice mail without having to risk talking to the person on the other end. So you get the benefit of using "personal communication"--instead of impersonal e-mail or text messaging, say--without actually talking to someone and perhaps having to dodge unpleasant questions.

We'll leave it to you to consider the possibilities.

But we see Slydial as an unfortunate yet logical development in an era when it seems that fewer people say what they mean, mean what they say and fully acknowledge responsibility for their actions.

That's one of the reasons we focus on the "message of the markets." We've found that the markets, in their collective wisdom, are much more relevant to making money and protecting capital than what government leaders, corporate CEOs or market pundits have to say.

To be sure, reading the message of the markets is an art, not a science, because the markets reflect the constant ebb and flow of human nature--and the inevitable swings among optimism, pessimism and that big area in between. What's more, these are challenging times, to say the least.

This week, for instance, stocks soared on Tuesday to their biggest one-day advance in four months on reassuring signals from the Federal Reserve and plunging commodity prices. But then worries about the economy and financial system took back the spotlight.

Here's the message as we see it. The stock market is in the midst of its fourth rally attempt since peaking last October. It's too soon to say if this one will last longer than the previous three. Valuations overall are very attractive. And corporate earnings have held up pretty well outside the troubled financial sector. But the reality is that the broad market still has a negative bias, and investors rightly remain skeptical.

The bottom line: When a sustainable advance develops, there will be plenty of time for you to profit. For now, stay cautious and conservative, but take advantage of opportunities we see developing now. More on that below.

Oil Is Down But Not Out

Oil prices were down roughly 20 percent from their all-time high of less than a month ago before rebounding modestly today. Does this mean the "oil bubble" is bursting, as some market commentators have been speculating lately?

No. That's little more than wishful thinking, in our view.

As we've often advised, the basic global supply-demand picture for energy makes it very difficult to see a bubble, much less the bursting of one. It's getting increasingly difficult and costly to find and develop new sources of supply. Meanwhile, on a global basis demand will continue to build steadily over the long term, regardless of a possible slowdown from the U.S. and Western Europe.

To be sure, the energy market was overdue for an inevitable and much-needed pullback after its stunning runup from February to July. And the correction could continue for a while in time and price and still be within the framework of a long-term bull market, as we point out in our current issue of Leeb's Income Performance Letter. Periodic, sharp declines are typical in commodities bull markets.