Investor Sentiment Check

The markets are still weak, with small and mid-caps down the most.

Bond yields are tumbling, down roughly 6 basis points to 4.62%. The bond market is clearly signaling that the Fed it too restrictive. Today, this is beginning to show up in the futures markets, as the odds for a rate cut in 2007 are growing.

The ARMS index is elevated today, nearing 1.50. The CBOE put/call ratio is also above-average hovering near 0.91. These should help mititgate the degree of losses on this last day of the month.

Bond Yields Moving Lower Despite ECI

The market is getting a little bounce at the open. Tech and biotech are both up nicely, while most other sectors are mixed.

The Employment Cost Index (ECI) came in at +1.0% (vs. +0.9% consensus). But while that might concern some of the inflation hawks, the bond market is signaling otherwise. The 10-year yield is moving lower again, falling 4 basis points today to 4.63%.

In other news and notes:

• CBG will acquire TCC for $49.51
• UARM beats estimates; stock up nicely
• BJS beats EPS by a penny; stock lower
• Goldman adds CSCO to Conviciton List
• STTX misses estimates; stock gaps down
• RACK reports solid qtr; stock higher
• SIRF upgraded to Buy at Longbow; tgt. $36
• Consumer Confidence 105.4 vs. 107.8 consensus
• Chicago PMI 53.5 vs. 58.0 consensus

long GS, SIRF

Investor Sentiment Check

The markets have erased their earlier losses, likely aided by the $2 drop in oil prices. Tech stocks are leading the way. Energy stocks are lagging. Bond yields are roughly flat at 4.67%.

I am hearing a lot of chatter among the investment community about whether or not we have made a significant top in the markets. They cite the overbought market, as well as glowing investor sentiment as reasons why the recent rally is over.

So let's take a look at the sentiment indicators and see how they stack up to previous periods when the market was topping:

• The bull/bear spread in the Investors Intelligence survey is +23%. This spread often gets into the uppers 30s or low 40s before the market tops. We are not there yet.
• The spread in the AAII survey is +22%. This one also gets well up into the 40s before the market usually tops. We still are not even at the highs for this year.
• The Public Short ratio is still near record highs (61%)
• The Rydex Nova/Ursa ratio is still low at .157; although it has been moving higher, it was at 0.22 back in January.
• The 10-day CBOE put/call ratio is down to 0.88; while it has been moving lower, it bottomed at 0.71 in January, still quite a way below current levels.
• The 10-day ISEE is still low at 146; it peaked at 179 in May and 192 in January.

So I could make an argument that the market may have peaked in the short-term, and maybe we do get a pullback. But I think any small pullback will bring the bears running to the forefront again, and help mitigate the damage of any such decline.

Monday Morning Musings

Good morning. The market opened slightly to the downside this morning, following on Friday's weakness, but has since moved back into positive territory.

Oil and gas prices are weaker, which is weighing on the energy stocks. But semis are moving higher, along with financials. Most other sectors are mixed.

Personal income came in BTE (+0.5% vs. +0.3%), though personal spending was a bit weak at +0.1% (vs. +0.3%). I think holiday sales will be fine this year, as the market has been doing better, yields are moving lower, and gas prices have fallen. Also, there is a good correlation between back-to-school sales and holiday sales in a given year, and BTS sales were solid this year.

In other news and notes:

• APCC to be acquired by Schneider Electric ($31)
• WMT sees October SSS +0.5%; below forecast
• BEAV beats EPS by a penny; stock up
• VZ beats EPS; stock lower
• Fed's Lacker says economy can stand further tightening
• UBS raises their S&P 500 target to 1500
• TSY acquired by GE Capital for $17/sh

long BEAV

Profit Taking? Or The Start Of A Decline?

The markets have continued to selloff, on the heels of this morning's weak GDP report. The Nazz is down the most (-1.6%), while the SPX is off -0.9%.

We know that profit taking had to set in at some point. No market goes straight up without pausing. I have heard some traders say that the market may have topped until the election.

This sounds feasible to me, given the run we have had and the overbought nature of the market. I still feel that there is enough investor skepticism about that any pullback will be relatively mild. But I would not be surprised at all to see the market chop around between now and election time (Nov. 7th).

Semis are down the most (-2.0%), after a report out of Goldman that motherboard demand has fallen off a cliff. This may be due to consumers pushing out PC buys until Vista comes out.

long GS, MSFT

Bond Yields Fall As GDP Estimates Below Expectations

The market is selling off in early trading after a weaker than expected GDP report. Of course, you know that I often say that the headlines are usually just a soundbite for the media to report. The GDP report may have been an excuse to take profits, considering the sharp rally we have had, but profit taking was going to occur at some point anyway.

Nonetheless, advance GDP for Q3 came in at +1.6% vs. expectations for +2.1%. Also, the important price deflator component (inflation) fell to +1.8% vs. expectations for +2.8%. This highlights the trend I have been harping on that inflation has likely peaked for the cycle.

Bond yields are confirming this, and moving sharply lower to 4.67%. Much of the weakness in the GDP report came from housing/construction, but I would expect that Q4 GDP shows a bit of a rebound. Regardless, this likely cements the fact that the Fed is firmly on the sidelines.

In other news and notes:

• Do you think: hard landing or soft landing?
• Michigan Sentiment 93.6 vs. 92.5 consensus
• WFR beats EPS, raises guidance; stock down
• ICBC in China is world's largest IPO
• IR misses estimates, lowers guidance
• DECK handily beats estimates; stock +10%
• ISRG beats EPS, but stock down sharply
• MSFT reports solid qtr., stock higher
• NTGR beats estimates; stock +15%
• CHK CEO says nat. gas going higher

long MSFT, WFR

Nazz Shows Relative Strength

The Nasdaq showed strong relative strength today, rising +1.0% versus +0.5% for the SPX.

Strength was notable across many of the economic sectors, and in particular biotechs, retail, and semis.

Volume rose substantially on the Nasdaq, making for a stong and second accumulation day in a row. What was also notable was the strong breadth on both the Nasdaq and NYSE.

Speaking of the NYSE, there were 398 new highs today, representing quite a broadening of leadership. Of course, the last time we had this many new highs was in May, which market a multi-month top in the market. I think the odds are lower of a repear occurrance.

Growth stocks really seem to be gaining leadership. I read a very bullish report from Hays Advisory today about the resurgance in liquidity from the Fed. If the spigots are truly being turned on, it should mean this rally has legs.
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Serving Up More Angst

The market continues to grind higher, despite all of the calls about being overbought, etc., etc.

Bond yields are falling to 4.72%. Oil and natural gas are also lower on the day, a positive for equities.

Here are some stocks making high volume moves in both directions:

• TTEC
• MICC
• SIRF
• LTM
• GS
• CELG
• VAR
• DRIV
• JLL
• RESP
• LNCE
• NETL
• CVD
• LMNX
• DTG
• AZN
• TSCO
• HRH
• FORM

Long GS, SIRF, VAR

SiRF's Up

My Stock of the Day today is SiRF Technology (SIRF).

I have been bullish on SIRF for a long time, although I have had my position hedged from time to time due to the above-average volatility associated with the stock.

SiRF reported an in-line quarter last Thursday, and the stock gapped higher. This was due to the fact that so many on the Street were bearish and nervous about the company's earnings report. When no major flies appeared, the green light was signaled.

Yesterday, Deutsche is confirming what I have been saying about increased handset penetration as cell companies rollout location-based services (LBS) in 2007. They also upped their price target to $33.

Today, the stock is gapping higher again, likely exacerbated by short-covering. Despite the recent run-up, money flow is just beginning to turn positive.

long SIRF

Housing Sector Finding A Bottom

The market got another nice bounce at the open, but is fading a bit. Yields on the 10-year note are falling further to 4.73%. I don't think the bond market is signaling more rate hikes, despite the chatter in the media.

New home sales came in better than expected this morning. This is helping the housing index bounce. Even those homebuilder companies that reported weak earnings saw their stocks go up. That's usually a good sign that we've reached a bottom.

Biotech stocks are leading this morning (+1.5%). CELG is up quite a bit.

How long can this market keep powering ahead? Tough to say. A quick, sharp pullback would probably shake investor confidence, but I still think we will be higher by year-end.

In other news and notes:

• The Help Wanted index hits 45-year low
• SNE profits drop -94% on battery recall
• AET beats EPS, raises guidance
• HAR beats earnings; gaps 20% higher
• VAR beats and raises; stock gaps +11%
• ORCL planning to move big into Linux; RHAT -27%
• DOW beats earnings, ups buyback
• BYD misses earnings; stock flat
• CMCSA beats earnings
• ISE downgraded at CIBC after big run
• WFR inks 10-year contract with Gintech of Taiwan
• CRS misses estimates; stock gaps lower

long DOW, ISE, WFR, VAR

Another Solid Market Close

The market rallied into the closing stretch, ending on a positive note.

Volume expanded along with the advance, making for an accumulation day. This is a welcome turn, following yesterday's mild accumulation day.

Bond yields moved decisively lower on the day, with the 10-year finishing at 4.77%. The potential for rising rates in the near-term was one worry on the horizon. It remains to be seen if the recent uptrend in yields is over, but it's looking that way.

Semis led the way today (+2.6%), followed by energy stocks (+1.7%). The energy group was bouyed by a spike in oil and natural gas prices, which also served to weigh on the retail sector (-0.7%).

All in all, more bullish action. And more frustration for the bears.

No Surprise From The Fed

As expected, there was little surprise from the FOMC in their announcement today.

The Fed held rates at 5.25%. Other comments included:

• Fed says inflation pressures likely to moderate over time
• Says economy likely to expand at moderate pace
• Says core inflation has been elevated
• Says economy reflects 'cooling' housing market

The 10-year yield is down a bit more to 4.80%. Stocks bounced in their initial reaciton.

Strong Earnings Helping Stocks Bounce

The market is higher in early trading, as a string of positive earnings reports have helped push stocks higher.

The 10-year yield is down slightly to 4.81%. Oil is trading higher on a bigger than expected draw in inventories. Semis stocks are leading the way, +2.3%. Homebuilders are also bouncing even though CTX reported soft earnings. It looks like these stocks may have finally bottomed.

In other news and notes:

• Since they cancelled Smith, my new fav show is Friday Night Lights
• AMZN beat estimates; stock gap higher
• Cramer says GOOG goes to $560 (I say higher)
• MNST misses EPS, guides lower
• PFCB beats estimates; stock higher
• IHP beats estimates, raises guidance
• ISE beats estimates; stock at new high
• MICC beats estimates; stock gaps higher
• TROW misses EPS; stock down
• Trump and Wynn get together to build in AC
• NSC crushes the estimates by 20 cents

long GOOG, ISE

Standout Stocks

Here is a partial list of stocks making notable moves on above-average volume:

• TZOO
• ININ
• COH
• VPRT
• CPO
• AXE
• NUE
• FWRD
• ALK
• HITT
• XPRSA
• GYI
• BUCY

The market continues to hang in there, for the most part. The FOMC meeting is tomorrow, but should not provide any big surprises.

I have taken a small short position in AMZN ahead of its earnings report tonight. I am hearing that it may have seen margin pressure during the quarter. I also think the recent split with Toys "R" Us could dampen its forecast for holiday sales.

long AMZN puts

Investor Sentiment Check

The markets remain under a bit of selling pressure today.

Big-cap tech is lagging the most, with the NDX down 1.05% vs. -0.25% for the SPX. Biotechs are also down -1.2%, despite the pop in AMGN. Energy and material stocks are enjoying the biggest bounce.

As for measures of investor anxiety, the VIX/VXN are relatively flat. The CBOE put/call ratio is above-average at 1.10. The ISEE is neutral at 152.

Overall, sentiment is mixed, though the high put/call ratio could keep things from dropping too much today.

Why Waiting For A Pullback Isn't Always Smart

The market powered higher again yesterday. For many who have been waiting for a pullback, being on the sidelines has been costly. That is why when you think the market is going higher, it doesn't always make sense to wait for a pullback as an ideal entry point.

Often, by the time that pullback does surface, it is from higher levels. As such, you leave more potential gains on the table by waiting, and thus the risk is actually higher by being out of the market.

While sentiment has grown more bullish in the last few weeks, it is still not back to levels where it was earlier this year, nor is it back to levels normally associated with near-term tops in the market. Maybe this week's surveys will change that.

The market is pulling back only slightly in early trading, with most sectors mixed. Bond yields are flat at 4.82%. If you look at a chart of the 10-year like a stock, it looks like it is going higher. This could hamper near-term gains for equities.

In other news and notes:

• SII beats by 3 cents, raises guidance; stock flat
• PNR reports solid revenues, in-line guidance
• OMC beats by 4 cents; stock gaps higher
• DD beats by 5 cents; stock gaps up
• COH also gaps higher on solid earnings, guidance
• AMGN reports solid results, bright pipeline
• ZRAN misses earnings, lowers guidance; stock -10%

long AMGN, PNR

Surprising Strength

The market was able to in fact close very near its highs. This was surprising strength, especially coming on the day after options expiration, when there is often weakness in the markets.

This marks a continuation of the rally that seems to be dragging investment managers in kicking and screaming. That is, those with cash on the sideline waiting for a dip to buy have not been presented with that opportunity.

Of course, as soon as everyone capitulates and jumps in the ring, we are sure to have a nasty pullback. The continuation rallies in stocks like AAPL and GOOG could also be mutual fund managers building up their winners ahead of their fiscal year ends in October.

long AAPL, GOOG

Investor Sentiment Check

As we enter the afternoon portion of trading, the sentiment indicators are mixed.

Although the volatility indexes are higher (VIX/VXN), they are not confirmed by the put/call ratios.

The CBOE put/call is hovering below average at 0.77.

The ISEE is trading at the equivalent of 0.70, which is around average.

I would not be surprised to see gains moderate a bit into the close.

Monday Morning Musings

The market started off in the red, but has quickly erased its early losses and is now trading in positive territory for the session. The likely culprit for the early weakness was bond yields, with the 10-year gapping higher to 4.84%.

There are not economic reports today, but the FOMC does meet on Wednesday. And Q3 GDP will be released on Friday.

Tech, financials, and retail all look mostly higher. While energy and industrials are a bit weak. Healthcare is a mixed bag at first blush.

In other news and notes:

• Is there a team worse than the Browns?
• IDTI, BKS, A, JNY mentioned positively in Barron's
• TWX says AOL sales amy shrink for the next two years
• HAL beats EPS by 4 cents, revenues +19%
• HAS beats estimates, stock gaps higher
• LRCX profiled in IBD's New America section
• Goldman initiates ENER with $40 target
• SLAB beats EPS, lowers guidance; stock -5%
• SiRF says new starIII chips being used by several companies
• PTRY ups guidance, stock falls. weird
• EPIC raises guidance; stock hits new high

long ENER, GS, SIRF

What Is An Appropriate Target on Google?

As long as everyone is throwing out new price targets for GOOG, I'll add my 2 cents. I have been bullish on the stock, as I have posted on this site, and even made it my biggest position as it emerged from its summer swoon.

So is the $600 price target from Citi outlandish? I don't think so. If I were putting out a stretch target, I would use $650. Now before you scoff, lemme do some 'spalinin.

GOOG could easily earn $14.50 next year if earnings momentum remains strong for the company. Also, if growth stocks start to get some multiple expansion (as my colleague Gary D posts), we could easily see GOOG trade at a PEG of 1.5x, or 1.5 times its growth rate.

By my calculations, GOOG currently trades at the lowest forward multiple it has in over 2 years. So let's say we see the multiple expand next year to something like 45x, which is high, but not crazy. Simple math get us to $650 using that methodology.

Now I don't think we get there overnight, but I think it is feasible to see that in 12-18 months. I plan to continue to trade around my core position, as there will be plenty of ups and downs for the stock. But if you're going to put out a stretch target, you might as well make it a true stretch.

Just like Gary "D" thinking his fantasy team will beat mine this weekend.

long GOOG

Happy Google Day

Bullishness pays off. I have been saying for months that I felt the weakness at YHOO was company specific, and that I would be surprised if GOOG was experiencing the same weakness. I also posted that I thought YHOO's woes could be exacerbated by share gains from GOOG. And I made GOOG my biggest position as it emerged from its summer correction.

So I am a happy camper today. GOOG beat both top and bottom line estimates handily. The Street is running to upgrade the stock, which is nearly $30 higher today. Goldman put a $595 price target on it, and Citi upped their target to $600. And I think those targets are reasonable.

I also have a small position in SNDK, which despite beating estimates nicely, the stock is getting crushed. So everything is not exactly rosy around the office. But I think there is a very strong likelihood that SNDK recoups all of today's losses and then some over the next few weeks.

Also, our old friend SIRF reported solid earnings last night. Given that sentiment had been so negative, the results were enough to lead to a +10% pop in the stock today. Nice.

In other news and notes:

• Grasso ruled to pay back tens of millions (still fighting)
• OPEC ups production cut to 1.2 mln barrels per day
• SLB beats by 4 cents; stock down anyway
• FBR says comps still negative at URBN
• Small quake hits off cost of Peru
• MMM up after beating earnings and revs
• BofA raises CME target to $550
• INFA plunges -15% after earnings

long GOOG, SNDK, SIRF

Investor Sentiment Check

Measures of investor anxiety are running around average levels, with some exceptions.

The ARMS index is still high. One of my colleagues told me the 3-day ARMS is as high as it was back in July. This is indicative of the bears trying to press their bets, imo.

The CBOE put/call ratio is running around average levels at 0.82.

The ISEE is still below average at 135. The 50-day moving average of this indicator is now down to 111.

Tomorrow is options expiration. Many times the market experiences a post-options expiration hangover in the following week. But I continue to believe that any pullback will be minor, and that this market will not give an ideal opportunity for bears to cover or for underinvested managers to deploy cash.
'

Strong Earnings Don't Help The Nazz Much

I would have thought the Nasdaq to be up more this morning, given the strong earnings and reactions from AAPL, EBAY, GILD, etc. But maybe the drop in AMD is weighing on semis enough to put a lid on it.

The dollar is a bit weaker this morning, helping push gold and commodities higher. Oil and gas are also higher, which is helping the energy complex. The brokers are taking a breather, after what has been a parabolic move higher. We were early in nailing that move when most were still skeptical.

In other news and notes:

• AAPL is the king of UPOD (not iPod)
• CTXS plunges after missing earnings
• SNE cuts profit target after massive battery-related losses
• UTX acquires UK-based Page Group
• C misses EPS by 2 cents; stock down
• CHKP beats EPS by 2 cents; stock up nicely
• NOK reports 36% market share
• DGX beats by 5 cents; raises FY06 EPS
• Deutsche raises CME target to $605 (wow)
• LEND lowers guidance; stock down
• BTU reaffirms guidance; stock looks like it has bottomed
• ISIL up after earnings report
• How high will GOOG run into its earnings report?

long AAPL, GILD, GOOG

After-Hours

EBAY reported results that beat on both the top and bottom-line. But guidance was a little light. Nonetheless, the stock seemed to hang in during late trading.

AAPL reported earnings that blew away estimates. The company offered conservative guidance for next quarter, but most investors already expected this, so the stock was up nicely after-hours.

AMD beat EPS estimates, but revenues were light and gross margins were lower. The stock was down over -10% after-hours.

GILD beat top and bottom line estimates, and all product lines looked strong. The stock finished about flat.

long AAPL, GILD

Standout Stocks

As my first post warned, the market has experienced a fairly large downside reversal, indicating that buyers may be satiated for the time being. I still expect any pullback to be shallow due to the lingering investor anxiety, high levels of put buying, and outsized short interest in the market.

As for today, here are some stocks making notable moves on above-average volume:

• ILMN
• APH
• PJC
• AP
• MET
• APOL
• ENDP
• CGNX
• JNC
• USNA
• LUFK
• NVLS

Setting Up For Disappointment

You know that I always caution about a market that opens up a lot and can't sustain that momentum into the close. That is exactly how we are setting up today. Strong earnings from IBM, INTC, etc. have bolstered enthusiasm.

The market got a huge boost at the open. The Dow quickly rose more than +100 points to cross the psychological 12,000 mark. That got everyone excited as CNBC started flashing it as "breaking news" and bringing out the bulls.

But you can already sense the market fading from this early euphoria. The NDX quickly gave up all its early gains, and the SPX is fading as well. I hope the market doesn't close down today, but I would not be shocked to see it.

The CPI came in at +0.2%, which is a good sign for inflation, and a sigh of relief given yesterday's PPI figure. Bond yields are down slightly on the news, with the 10-year at 4.76%. Oil is also slightly lower, along with the energy stocks.

In other news and notes:

• Did you hear about Steve Wynn's Picasso?
• ILMN gaps higher after beating earnings
• YHOO lowers rev guidance for Q4 and FY
• Options scandal claims execs at SAPE
• LUFK lowers guidance; stock lower
• APOL misses EPS; stock down -18%
• TEVA CEO Makov to step down
• USNA down after earnings
• MOT also down after earnings

long INTC

Heading Into the Home Stretch

With an hour to go, the market has come back and cut its earlier losses by more than half.

One earlier sign that we could see a late day rally was the spike in investor sentiment indicators. The VXN was spiking higher, and the TRIN hit 2.29 - an elevated reading.

Also, the CBOE put/call ratio was near 1.0 early on, while the ISEE opened at the equivalent of 1.28, and has been running above 1.0 all day.

So once again, investors were quick to jump on downside bets as soon as the market looked weak. But the time for us to get really worried, is when the market declines, and investors merely act complacent. That's not happening yet.
'

The Pullback That Was Overdue

The market seems to be pulling back from its extended uptrend and overbought condition. You can look at the headlines (PPI) and blame it on that, or you can just accept that this pullback was overdue. Of course, it's still early, so we will have to see how the market closes.

Despite what looked like a big headline inflation figure (+0.6% vs. +0.2% consensus), the yield on the 10-year is dropping, down 5 bps to 4.74%. Go figure.

The Nasdaq and tech stocks are taking it on the chin, with several downgrades ahead of earnings season. Tonight we hear from YHOO, INTC, IBM, etc.

In other news and notes:

• Are you still pretending you don't watch The Bachelor?
• NCC beats EPS by 11 cents
• UTX beats by 3 cents, raises guidance; stock down
• EMC to cut over 1000 jobs
• MER beats EPS handily, ups stock buyback
• CME announces merger with CBOT for $8 billion
• ICOS being bought by LLY
• BWNG being bought by LVLT
• JNJ beats EPS and revs; stock up
• Net foreign purchases = $116.8 billion vs. $53B consensus
• NVR misses EPS, lowers guidance

long JNJ, UTX

Investor Sentiment Check

A look at the weekly sentiment indicators shows that investor optimism has grown, but it is still not at levels normally associated with meaningful tops.

Here is a look at some of the indicators:

• The bull/bear spread in the Investor's Intelligence poll rose to +22 (52% bulls, 30% bears)
• The spread in the AAII poll rose to a still low +11 (49% bulls, 38% bears)
• Bulls on Market Vane rose to 72% (this is the only survey showing high bullishness)
• Rydex Nova/Ursa still low at 0.13
• Short interest ratios still at very high levels
• 10-day put/call ratios have only come down to neutral territory

On balance, most of the indicators simply point to the beginning of the removal of high levels of bearishness. But they are generally not flashing the same warning signals that we often see at market tops.

For that, we would need to see the spreads in the investor surveys rise to the +40 level. And we would need to see the put/call ratios fall to the lower end of their historical ranges. We are simply not there yet.

So while a pullback could come at any time, I don't think it will result in a protracted decline that is usually necessary to shake investor confidence. More likely, since the markets are now overbought be nearly every measure, it will be a correction that allows the market to consolidate before making another run at new highs into year-end.

At least...that's how I see it.

Monday Morning Musings

The market has once again quickly recovered the small declines seen at the open. This is a continuation of Friday's strength, where the NYSE registered more than 300 net new highs. That's very strong, and a sign of broadening leadership in the market.

If you want to see an example of a forgiving market, look no further than United Healthcare (UNH). Despite the CEO stepping down due to the options investigation that has plagued the stock, UNH dipped briefly near the open but is now acutally trading higher. Go figure.

Oil prices are roughly flat, but the energy stocks continue to get a bounce. Bond yields are down slightly to 4.79%.

Get ready for a busy earning week.

In other news and notes:

• Is the market simply waiting for Dow 12,000 before it pulls back?
• UNH CEO McGuire to step down on December 1, 2006
• OPEN purchased by two private equity firms for $930 million
• Samsung profits rise +16%
• INTC said Q4 sales to be higher than expected - Bloomberg
• Hawaii hit by 6.6 magnitude earthquake
• OSK buys JLG for $28/share
• ETN reports strong earnings; stock up
• HNT ups stock buyback to $450 million

long INTC, UNH

Bond Yields Still Climbing

The markets are mixed at the open, after a very strong run into the close yesterday. Bond yields are climbing higher, with the 10-year breaking above its 50-day and reaching 4.80%.

Retail sales were weaker than expected, but the stocks are hanging touch. Most of the drop came from the plunge in gasoline sales, which is actually a good thing.

GE reported an in-line quarter, and the stock is down slightly. This isn't that surprising, given the strong run the stock has enjoyed recently. Next week, earnings season will really kick into full gear.

In other news and notes:

• Wish me luck in Vegas this weekend
• Do you prefer 30 Rock or Studio 60?
• ASFI profiled in IBD
• JTX announces $200M buyback
• NPD says Sept. video game sales grew +38%
• JBHT beats EPS, revs light
• AmTech expects solid results from SNDK next week
• Cowen says SIRF well positioned for LBS in 2007
• ASPV lowers Q3 revenue guidance

long GE, SIRF, SNDK

Biting My Toungue

I know you don't want to hear me say it was another solid rally. All I can say is that even I was surprised. I had to leave the office for the last 2 hours of the trading session, and when I got back, I couldn't believe how much we rallied.

The small- and mid-caps really led the way, with the RUT +2.1%. Nice. And nearly every sector was higher today, save for the utilities.

Breadth was very strong today, with the Hi/Lo index on the NYSE hitting +276. That is the most net new highs the market has seen since May 5th. It is a sign that leadership is broadening, which is bullish.

The investor sentiment surveys that came out today showed small increases in investor optimism, but nothing meaningful. I still think most investors are watching this rally, but they either don't believe it will last or simply just don't trust it.

As a result, there is still likely ample fire power on the sidelines, which will likely slowly find its way into the market as the indexes stair-step higher.

The only knock on today's rally would be volume. By my count, volume came in slightly below yesterday's levels. This is okay, but I don't want to see a pickup in distribution days.

Nice Start To Earnings Season

The market is getting a firm bounce at the open on the heels of some strong earnings reports. This is likely to result in another quarter of double-digit earnings growth for the S&P 500 companies.

Oil is trading slightly higher, which is supporting the energy stocks. Bond yields are down slightly, with the 10-year yielding 4.76%. Yesterday, the 10-year yield broke above its 50-day average, so it bears watching if a new uptrend in yields is at hand.

Semis are lower after a couple of downgrades. Brokers are again very strong.

In other news and notes:

• YHOO talks with Facebook stall - WSJ
• COST beats earnings; stock up
• HOG beats EPS and revenues
• CROX profiled in IBD; new highs
• PEP beats EPS, guides in-line; stock lower
• MCD beats same-store sales, raises EPS guidance
• DLX raises guidance for Q3 and FY
• GENZ beats EPS, revs light; stock lower

long PEP

Fed Still Worried About Rising Inflation

I believe that the plunging commodity prices, the steep drop in gold, and the decline in energy prices are indicative that inflation has peaked for the cycle. Moreover, the shape of the yield curve suggests that the bond market is more worried about future growth than inflation.

Nonetheless, the members of the FOMC still seem to be worried about inflation. Here are some comments from the release of the most recent minutes from their last meeting:

• Core inflation 'undesireably higher'
• Concern inflation won't decline as forecast
• Fed credibility would suffer unless core rate fell
• Housing in particular continuing to moderate
• Growth likely to quicken next year

I trust the bond market more than a group of central bankers, who have a history of pushing monetary policy too far (in both directions). I am still hopeful that they can achieve the desired soft landing, but this remains to be seen.

Looking To Catch Another Wave

SIRF shares have slowly shed more than 20% from their September highs.

I have been hedged on my remaining shares with put options, but yesterday I sold those options. I think the stock has come down plenty, and I am now looking to build back up my long exposure.

I think the quarter and outlook should be okay, but if investors overreact to the earnings report again, I will look to use the weakness to build my long position.

long SIRF

Will Early Weakness Again Morph Into Late-Day Strength?

One of these days the market is sure to open weak, and stay that way into the close. The market is weak again this morning, after a few earnings warnings and some negative reactions to a couple of actual earnings reports.

The bond market is open again today, with the yield on the 10-year hovering around 4.74%. Oil is down slightly, and the energy stocks are lower across the board. OPEC is getting closer to the 1 million bpd cut that has been rumored, according to the oil minister in Qatar.

Financials are brokers are the weakest group so far, while semis and homebuilders trade dry (bucking the weakness).

In other news and notes:

• LM lowers guidance; stock falls -16%
• INFY beats EPS, raises guidance
• T.Boone Pickens sees $70 oil before $50 - CNBC
• DNA beats earnings, but stock sells off
• CVG raises EPS, revenue guidance
• Citi ups NTRI target to $95
• AA misses EPS estimates; stock down
• BofA announces free online trades; online broker stocks lower

Another Day, Another Rally

I don't want to sound like a broken record, but it is remarkable how many days lately the market has looked weak at midday only to see a late day rally. The market is not up a lot, but enough to erase earlier losses and further frustrate the bears.

Another reason why I did not think that we would see a rally today was the the put/call ratios were finally beginning to show some optimism. The CBOE put/call ratio opened below 0.50, and the ISEE was above 200 - both showing high bullishness.

Oil fell back below $60, amid skepticism surrounding potential OPEC production cuts. As for bond yields, the 10-year finished at 4.75%.

Here are some standout stocks moving on above-average volume:

• AVZ
• PRFT
• ROG
• BFAM
• KNOT
• UARM
• GFIG
• CPA
• LNY
• SHPGY
• CIEND
• VECO
• IPSU
• MCHP

Google Confirms YouTube Purchase

The market is under a bit of selling pressure in the first hour of trading. Lately, we have seen weakness show up in the early part of the trading session, and strength emerge as the session closes. This is a signature of strength and an underlying bullish tone.

Oil and gold are both trading lower this morning, although energy stocks are up. Bond yields are bouncing higher, with the 10-year yield at 4.73%.

Financial stocks and retailers are strong this morning (and homebuilders), while healthcare and semis are lagging.

In other news and notes:

• GOOG confirms its $1.65 billion purchase of YouTube; stock moves higher on positive analyst comments and price target raises
• CVS raises Q3 and FY06 guidance; stock barely higher
• Maxim starts GLW with a Buy and $30 target
• VECO warns due to delayed shipments
• ELOS gets FDA ok on dental laser
• Kaufman raises NTRI target to $100
• ROG raises Q3 guidance; stock gaps higher
• CHTT beats Q3 EPS; stock nicely higher
• CIBC anticipates soft YHOO quarter, guidance
• PSYS down on acquisition
• How did The Bachelor keep that girl from Houston?

long GOOG

The Technimental Take

While the SPX has continued to push into new high territory, the Nasdaq has not yet reached its May highs. The chart above shows that the COMP needs to get to 2375 to match those highs. I think it will get there, and then go on to make news highs as it plays catch-up to the SPX.

Normally, I would expect some sort of consolidation along the way. And I still think there is a good likelihood of said event. But I am starting to believe that there is an increasing change that the market could experience a "melt-up", as performance anxiety reaches a cresendo. If so, any pullback would likely occur from much higher levels, and it would not make sense to wait for it.


Looking at the sentiment indicators last week, I was shocked to see the AAII bull/bear spread move back into negative territory (-9%), despite the market making new highs. As I said, no one seems to be embracing this rally. The spread on Investor's Intelligence, at +16%, is also well below levels seen at previous market highs.

Here are a few other supporting factors:

• The Rydex Nova/Ursa ratio is still low at 0.111
• The Public short ratio matched it's record high at 64%
• The 10-day ISEE index is still very low at 114

I continue to look for near-term opportunities to put more money to work. Growth stocks continue to break out and should lead the market into year-end.

Monday Morning Musings

Last night, before I went to bed I saw on the news that N. Korea was claiming a successful nuclear test. Given the events, I would have thought the markets would have opened lower than they did.

Oil and gold are up only slightly, the equity markets are mixed right now, and the yield on the 10-year is up a couple of basis points. Normally you would see more of a flight-to-safety into U.S. Treasuries, which would push yields lower. Is this complacency? Or a correct assessment that there is more bark than bite to N. Korea?

Earnins season kicks off this week, but doesn't really kick into high gear until next week. But it will be interesting to see how forward earnings guidance is viewed by investors, and if earning season will spark a pullback in stocks.

In other news and notes:

• I just read my fav new show, Smith, has already been yanked. Sorry, Ray.
• MA gets hit on multiple downgrades
• PNC agrees to buy MRBK for $6 billion; stock up +20%
• GOOG signs distribution agreements with WMG, Sony BMG
• Founder and CEO of MNST resigns. Ouch.
• NRPH gets ok for ADHD drug for kids; stock up +50%
• TGT warns studios over movie downloading pricing
• Dolan family takes CVC private for $27; stock up +12%
• Motocross on Friday night was awesome

long GOOG

Weekly Recap

The market put in another solid week. The SPX pushed further into new high territory, while the Nazz played catch-up and looks to make new highs soon. Here is how the indices fared this week:

• S&P 500: +1.0%
• Nasdaq: +1.8%
• Russell 2000: +2.0%
• DJIA: +1.5%

Click here to read the complete Weekly Wrap

Small Consolation For The Bears

Today looked like it could be the day for a significant pullback, but once again the market rallied into the close. It didn't make it all the way back to positive territory, but did erase more than half of its midday losses, basically snatching victory from jaws of the bears.

Volume ran lower than yesterday's session, which is good to see. And new lows on the NYSE were a paltry 16. Most sectors were mixed, even as the major indexes were all down.

But it was a solid week overall. Growth stocks outperformed again, with the Russell 1000 growth +1.4% for the week, and the Nasdaq 100 gaining +1.9%.

I'll have more on the weekly wrap tomorrow. For now, I'm off to an exciting Motocross event to see Jeremy McGrath and the boys.

Payrolls Much Weaker Than Expected

The market has opened under stiff selling pressure this morning, as the September payrolls report was much weaker than expected.

Payrolls grew only 51,000 vs. expectations of 120,000. But there were sharp upward revisions to previous payroll estimates. This is causing bond investors to take profits and sell bonds. The effect on yields pushes them higher, with the 10-year yield rising 6 basis points to 4.67%.

Financials are lower across the board, while most other sectors are mixed.

In other news and notes:

• MU reports earnings, revs light; stock down -10%
• CCI acquires GSL for $5.8 billion
• BHI September rig count down 5
• CHTT up +20% on brand acquisitions
• Rumor of GOOG buying YouTube
• SBUX ups long-term store count to 40,000
• Bloomberg reports N. Korea could test nuclear bomb this weekend
• AG lowers Fy06 guidance; stock down -15%

long GOOG

More Frustration For The Bears

Another solid day. The market again shook off its midday weakness and rallied into the close. This has to be terribly frustrating for the bears.

Small-caps led the way (+1.3%), followed by mid-caps (+1.2%). Energy stocks got the strongest bounce (+1.9%), along with biotechs (+1.3%), brokers (+0.5%), and industrials (+0.5%).

As for investor sentiment, the ISEE Index opened at 200, a level that we have not seen for this entire rally, but by the end of the day that bullishness had again faded and the index closed at 107.

As long as investors remain skeptical of these rallies, I believe pullbacks will be short-lived. At some point, everyone will move to the bullish camp and it will be time to get more defensive. But that will likely come at higher levels from today.

More On Retail Sales

Here are some of the individual retail sales reports (vs. consensus):

• ANF: +10.0% (vs. +6.5% consensus)
• AEOS: +19.0% (vs. +12.7%)
• CHS: +2.1% (vs. +1.8%)
• PLCE: +20.0% (vs. +14.5%)
• GES: +11.3% (vs. +3.2%)
• GYMB: +20.0% (vs. +11.2%)
• KSS: +16.3% (vs. +8.8%)
• JWN: +13.4% (vs. +7.2%)
• SBUX: +6.0% (vs. +3.6%)
• TGT: +6.7% (vs. +5.2%)
• TJX: +9.0% (vs. +4.6%)
• ZUMZ: +14.9% (vs. +6.5%)
• CTRN: +8.3% (vs. +13.0%)
• COST: +4.0% (vs. +5.3%)
• HOTT: -7.3% (vs. -4.6%)
• PIR: -11.2% (vs. -8.5%)
• SHRP: -21.0% (vs. -17.8%)
• WAG: +8.5% (vs. +10.3%)
• WMT: +1.3% (vs. +2.5%)

Long CHS

Retail Sales Strong In September

The markets are mostly mixed in the first hour of trading. Oil is getting a bounce on speculation that OPEC will meet and implement a production cut. This is helping the energy stocks bounce.

The retail sales reports were mostly better than expected, and many of the stocks are having positive reactions. I will provide a quick roundup in my next post.

Bond yields are rising, with the 10-year at 4.61%. Financials are mostly lower, but some of this could be profit taking, as they have had a nice run lately.

In other news and notes:

• I am addicted to the new show, Smith
• International markets are rallying, espeically India
• MAR beats earnings, raises FY06 guidance
• AEOS ups guidance
• GOOG gaining more share in search (comScore)
• ECB raises rates to 3.25% (from 3.00%)
• AAPL options investigation winds down with no big surprises

long AAPL, GOOG

Closing At New Highs

The market closed right at session highs. Volume levels grew on both exchanges, making for a solid accumulation day.

Big tech led the way (+2.5%), followed by small-caps (+2.1%). Financials, biotechs, and retail were all strong with 2%+ gains across the board. Tomorrow we get same-store sales results for September, so it will be interesting to see if there is profit taking.

Bond yields were lower on the day, with the 10-year finishing at 4.56%. The yield curve is the most inverted since 2001, and is now signaling approximately 35% chance of a recession (according to Fed reports).

Growth stocks appear to be moving to the forefront, and this rally looks like it has legs. Yes, I am still sitting on more cash that I would like, and will be looking for any near-term opportunity to put more to work.

Takeaway: don't raise too much cash in a market that is making new highs

Are Options Investors Embracing This Rally?

How are options investors embracing this rally? They're not.

The CBOE put/call is running at an above-average level of 0.93, displaying ample skepticism.

The ISE index is at the low level of 114. This is amazing. I would expect to see some readings well north of 200 as options investors position themselves for some upside exposure/protection.

This is a true 'wall of worry'.

Buying Stampede

The buying pressure today just slowly fed on itself, and has turned into a mini melt up! Every sector is participating, even energy as crude oil bounces.

The Nasdaq is simply ripping, and small-caps are having a big day as well. Can you say, performance anxiety?

Here is a list of some standout stock moving on above-average volume:

• WRLD
• OMG
• BOT
• ICE
• WCC
• JCG
• GILD
• NVDA
• AH
• VTIV
• HYDL
• PD
• BOOM
• CTV

long GILD

Shaking Off More Weakness

Yesterday, the market shook off midday weakness to close with small gains for the session. So far today, it is a repeat performance. While there is still a lot of time left, the market has erased its early losses and moved into positive territory.

Big tech is leading the way (+1.1%), along with semis and biotechs (+1.1%). Energy and materials are again taking it on the chin. I pared back most of our energy exposure last month, but I am contemplating adding a little to the Canadian energy trusts, now yielding 18%+.

The ISM services index came in below expectations today. That helped push bond yields lower again. After hitting 4.65% at the end of September, the 10-year yield has shed 8 bps to 4.57% and looks like it could move lower still.

Retail stocks continue to get a nice bounce ahead of tomorrow's retail sales reports. I like the retailers on a pullback, as I think lower interest rates and lower gas prices will embolden the consumer.

Dow Reaches All-Time High...next

The Dow hit its all-time high. But unless your portfolio has been overweight GM, PFE, T, etc., you probably shouldn't really care. It's always hard for me to convince people that what they hear on a daily basis on CNBC isn't always what they should be focusing on.

The big news today is the schmeissing of the commodity complex. Gold is down huge, and oil is below $59 now. That is causing the energy and material stocks to experience a fairly meaningful sell off.

The financials and retail sectors are higher, and tech is mixed.

Here are some stocks making standout moves on above-average volume:

• WCC
• KSS
• ICE
• MWRK
• GLYT
• WRLD
• DGX
• HLX
• MRVL
• PBG
• COLM
• NOV

More Declining Commodities

The market has opened under some selling pressure this morning, as commodity prices continue to decline. Some think this is forecasting a weaker than expected economy, but the flip side of that argument is just that all of the money that has flowed into commodities is now coming out in search of a new home.

Oil has dropped below the key $60 psychological level. Gold is down another $16. Bond yields are down a touch to 4.61%.

In other news and notes:

• Did you watch The Bachelor last night? Tell the truth.
• MRVL drops after lowering revenue guidance
• PBG lowers EPS guidance
• KSS beats sales estimates; raises guidance
• DGX drops after losing lucrative UNH contract
• SWKS raises guidance
• HLX lowers guidance; says problems are short-term

long UNH

Investor Sentiment Check

As we get ready for the home stretch, volume is running light, as expected. The market looks like it got hit with a moderate sell program, which led to quick declines across the board.

But investor anxiety is running at above-average levels. The TRIN is at 1.30, the CBOE put/call is above average at 1.16, and the VXN is spiking +9% and moving above its 50-day.

So we are not seeing the type of complacency on this decline that the bears would like us to believe.

Mutual Fund Monthly

Here is the monthly roundup of the top and bottom 5 funds from our mutual fund program. You will notice that it is growth funds that make up the laggard category.

Top 5

• DREGX: +20.1%
• TREMX: +14.6%
• WASAX: +13.2%
• BPTRX: +11.1%
• TAVIX: +9.5%

Bottom 5

• PRNHX: +1.1%
• TMGFX: +1.0%
• QUAGX: +0.4%
• MFOCX: -0.2%
• HFCGX: -0.6%

I would also like to give a shout to the Loomis Sayles Bond Fund (LSBRX), which is up +8.1% ytd. This is beating more than half of the funds on my list. Nice job, Dan.

long all funds mentioned

Sticking With Ebay

(This post was supposed to go up Friday, but didn't due to Blogger publishing difficulties)

There hasn't been a lot of news on the fundamental front for eBay lately. I have heard anecdotally that listings activity has been solid. And yesterday, PayPal announced it reached a settlement with 28 states. But this update was prompted more by the technical action of the stock.

If you look at the recent chart, you see that after bottoming in August, the stock rallied back above its 50-day and now looks like it has successfully converted that resistance into solid support. Last week the stock found good support along this moving average before gapping higher on Tuesday (9/26) following a Goldman Sachs upgrade.

The stock has had 2 big up days this week, and both came on notable increases in volume, a bullish sign. Money flow has also turned positive after a prolonged slump. So EBAY still looks okay to me, and I think it will continue to work higher. Remember, this stock is still more than 40% off its 52-week high. I'm not saying its going back there in a hurry, but I'll take it one day at a time.

long EBAY, GS

Monday Morning Musings

The market has opened under a bit of pressure, picking up where it ended Friday's session. Volume ticked higher on the Nasdaq Friday, making for a distribution day. We haven't seen too many distribution days over the last several weeks, but I still don't want to see any pickup. For now, I think any near-term dip should be a good buying opportunity.

Most sectors are mixed right now. Oil is trading a bit lower, while bond yields are essentially flat. Expect trading volumes to be lighter today due to the Yom Kippur holiday (I was born on Yom Kippur, fyi)

Same-store sales will come out this week, so we will see how the consumer has held up recently. And Friday will bring another jobs report that will likely bring more bark than bite.

In other news and notes:

• AAPL hit on Citi downgrade
• GILD buys MYOG for 50% premium
• OPMR/CRYP hit by Internet gaming news
• LCAV gaps lower and on guidance
• Brean Murray positive on TRLG
• ISM Index comes in at 52.9 (vs. 53.5 cons)
• MS acquires bank in China
• WMT reports moderating same-store sales
• HET in talks to go private

long AAPL, GILD