NEW YORK (CNN/Money) -
Where stocks looked to open -- down or up -- shifted rapidly heading into the New York open Wednesday. Wall Streeters were ascribing all sorts of reasons for the shift.
First, they were going to go lower. Why? Concerns over what sort of a post-war administration there will be in Iraq, of course, and worries over whether the economy will be able to revive. There was a new tape from Osama bin Laden exhorting Muslims around the world to launch terror attacks.
Never mind that all these "reasons" seemed a little hollow. It's not like post-war Iraq and the economy were new issues. Nor was the bin Laden tape new -- it was first reported on Tuesday afternoon.
The stock index futures turned up. How come? The failure of the Iraqi minister of Information to appear at a news conference. Footage of jubilant crowds cheering U.S. Marines in Baghdad.
But the negative and the positive news angles were both available all morning long. It looked like traders were just watching where the market was headed, and then deciding which stories were important.
"The news just seems to follow the markets," said Raymond James chief investment strategist Jeff Saut.
What's really happening, thinks Saut, is the market's still digesting the sharp rally it saw at the open Monday when traders began to reckon the war was basically over. That rally faded quickly -- after rising as much as 240 points, the Dow Jones industrial average closed the day up just 22 points. That "victory spike," as Saut calls it, ran into what's known as supply, a level at which there are many willing buyers in the market place.
"It's what normally happens after an emotional peak," he said. "You get a one to three day feint, and then you get another attempt to rally."
The key to the market, according to Saut, will be in the character of the rally. If stocks can hop past the highpoint they made Monday morning, it will mean that investors have changed their mind, and no longer believe that it's a good level to sell at. It would be a sign that the move higher is going to have at least another leg to it.
But if the rally stalls, look out below.
It's unclear to Saut which of those scenarios is going to play out. For now, he thinks the best strategy is to sit and watch how things unfold.
"I wouldn't be short or long," he said. "The market right here is in the twilight zone."
(New York) Postscript
Take, say, the 4 or 5 train from the Upper East Side on down to New York's financial district, and you'll see that Wall Streeters aren't so high-minded as you might think.
Sure, there's a smattering of traders and bankers reading The Wall Street Journal, The Financial Times and the like. But most of them have one of the city's two tabloids, The New York Post and The Daily News, pulled up to their faces. And what did the Post and News have on their covers Wednesday morning? New of war? Reports on the latest bin Laden tape?
No. They had shots of Yankee Hideki Matsui's grand slam home run in the New York opener.