Ambac's Rise Shows a Functioning Market

Ambac (ABK - commentary - Cramer's Take), a monoline insurer, posted surprisingly better results that included a $900 million gain on credit derivative hedges. Seems these things can work both ways.

I don't think this gives us any insight into AIG's (AIG - commentary - Cramer's Take) earnings, which come after the close, but the market likes Ambac today. It doesn't like Freddie Mac (FRE - commentary - Cramer's Take), which is down sharply after disappointing results. It might be trying too hard to make a point, but in bull markets, stocks go up on bad news. Freddie is down.

But Ambac is up, and I would see that as a healthy sign that the market is acting in an almost normal way. It's extremely volatile for sure, but it's punishing those companies that disappoint and rewarding those that surprise.

Oil finished the "open outcry" session at 2.30 (electronic trading continues) with a slight decline of 66 cents to $118.51. The inventory numbers were mixed, with a large drawdown in gasoline. That might give some life to the refinery stocks, figuring gas demand could grow.

But Soleil's Jacques Rousseau cautions that while the stocks -- especially Valero (VLO - commentary - Cramer's Take) and Holly (HOC - commentary - Cramer's Take) -- might be good for a trade, they have capacity that can be brought back, and margins could well remain pressured. My pal Dennis Gartman, of Gartman Letter fame, responded to a question on CNBC this morning that oil could go to $80.

The dollar is acting as though oil is going lower. The currency is very strong against the yen today (Japan's economy is slipping badly) and trading up vs. the euro. Lower oil allows a higher dollar, and a higher dollar brings about lower oil. The action in the oil market and in the dollar is very encouraging.

Mortgage applications were up a little last week, 2.8%, after falling 14% the prior week. Rates on 30-year fixed mortgages averaged 6.41% for the week, off very slightly from the 6.46% average of the week before, but down from the high of 6.59% a short while ago. Fixed 30-year rates are quoted at 6.38% today, and that compares with 6.26% a year ago. That's despite fed funds being down 325 basis points. Credit availability is extremely tight, and that will have to loosen before the stock market can have a sustainable advance.

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Vincent Farrell Jr. is chief investment officer for Soleil Securities Group and a regular guest on CNBC and other national print and broadcast media.

Prior to joining Soleil in August 2008, Farrell was a principal of Scotsman Capital Management. Before that, he was chairman of Victory Capital Management of Cleveland and chairman of Victory SBSF Capital Management in New York. He was a founding partner of Spears Benzak Salomon & Farrell, which was acquired by KeyCorp in 1995. Vince held a variety of positions in his 23 years at SBSF, including chief investment officer, and he served as the portfolio manager on a number of the firm's largest client relationships.

Prior to joining SBSF, Vince spent nine years at Smith Barney as a vice president, sales.

Vince graduated from Princeton University in 1969 and received his MBA from the Iona College Graduate School of Business in 1972.