Looks like a positive open with the DJIA projected to gain 90 to 130 points by 10 o’clock. This is in spite of a rise in jobless claims for the week ending July 17.

The increase in claims exceeds the highest projection of economists.

Claims up - market up.

Make sense ?

Not based on past behavior when the market tanked on unpleasant surprises.

Positive reaction to bad news is normally bullish.

Like I said yesterday, the Bulls need a “blowout day,” without it, we will get rally failures – OK for nimble traders, but dangerous for the average investor.

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Thursday, July 22, 2010 9:24 am EDT

DJIA: 10,120.53
S&P 500: 1069.59
Nasdaq Comp.: 2187.33
Russell 2000: 612.64

I must say, this market action is S-T-R-A-N-G-E !

It appears yesterday’s sell off was related to Fed chief Bernanke’s inconclusive comments, which occurred at a time when generally good earnings reports are being released.

Let’s step back a moment and look at the bigger picture.

Most consumers are playing their spending cards close to their chests. Their savings rate is up, borrowing rate declining, thus they are becoming more liquid. The economy will not get goosed big-time from this sector.

While unemployment/underemployment is anyone’s guess ( 9.6% - 15% ), some 85% - 90% of Americans are receiving a paycheck. Thanks to an overwhelmingly negative press, the consumer is only a little less concerned about the economy than when it was perilously close to a meltdown 18 months ago.

The consumer is adapting to the fact their net worth took a beating and an economic recovery will be slow and scary at times. But life goes on, just at a different pace.

Most of the corporate sector is a lot more healthy. Balance sheets have been tightened, and profitability, or the prospects for increased profitability, have improved. They will rehire people, but only when they have to.

The key here is, how reasonably are the stocks of these corporations valued, and more importantly how do those values compare to prospects 1 – 3 years out ?

Some of the BIG money will trade aggressively, repeatedly clipping a small profit wherever they can get it.

Others will invest for the longer term, and will be buying the undervalued stocks of companies whose future prospects are bright.

Investors big and small are trying to get a fix on valuation right now. Has a 30% plunge since the October 2007 bull market highs adequately discounted what has happened and the outlook for the future ?

I suspect that won’t be resolved for a number of months, but in the interim. I do expect a lively traders’ market.

George Brooks