Will the January Barometer Ring True?

So goes January...

The axiom from the Stock Traders Almanac is that as goes January, so goes the year. So with that, let's take a look at how some of the major indexes fared for the month:

The Transports led, +7.6% (strong economy, anyone?)
The S&P Midcap 400 rose +3.7%
The Nasdaq gained +2.2%
The S&P 500 Index rose +1.5%
The Dollar Index (DXY) gained +1.15%
The CRB Index fell -2.0%

And oil, despite this week's big rally, still lost roughly -7% for the month.

Also, by style, growth outperformed value on average. This looks like a solid start to the year, and one that I think can continue, albeit it with some bumps and hiccups along the way.

Fed Likely to Sit On The Sidelines For Awhile

The market obviously likes what it heard out of the FOMC statement, with both the bond market and stock market rallying nicely. The Dow is now up over 100 points, and the bond market has rallied also, pushing the yield on the 10-year down 5 basis points to 4.82%.

I think this moves makes sense. The bears held the thesis that if a rate cut was pushed out in time, it would be negative for the markets. But the Fed's comments simply mean that the economy is on more solid footing than previously estimated.

Add to that they expect inflation pressures to moderate, and you truly have a Goldilocks economy. And we all know what stocks are capable of in that environment.

I still think the Fed's next move will be to lower rates, not raise them. But I am content to see the Fed simply sit on the sidelines for months.

Fun With Fund Flow Data

Today, Investor's Business Daily ran a story on fund flows compiled by the Investment Company Institute. It said that shareholders pulled $2.47 billion from domestic funds in December, while foreign funds pulled in $13.12 billion.

That is a huge, glaring disparity. Foreign markets have outperformed the domestic market for the last four years, so it makes sense that there is a lot of performance chasing going on.

But we all know how this story ends. A sharp correction in the international markets could spark a big reversal in fund flows. This is another sign that the bull market here isn't over. When we see a reversal of the above trend, and domestic markets pull in gobs of money and outperform for several years, then I will pay heed to those who like to call market tops.

Today's News and Notes

Here are some news and notes for this morning:

• Adv. Q4 GDP +3.5% vs 3.0% consensus
• Employment Cost Index 0.8% vs 0.9% consensus
• Asian markets down overnight
• China tumbles most in 21 months; Toyota declines
• BFAM Family Solutions profiled in Heard on the Street - WSJ
• Sony sees gaming losses growing in 2007
• Time Warner reports in-line; guides below consensus
• Deutsche Bank AG profiled in New America section of IBD
• NMX beats by $0.08; stock flat
• Boeing beats by $0.19, ups FY07 EPS guidance
• NTRI reports weak qtr; stock plunges further
• GOOG above $500 mark ahead of earnings
• Oil and Gas stocks upgraded to Buy at Oppenheimer
• NYSE Group and Tokyo Stock Exchange confirm strategic alliance
• Time Warner still in talks with Liberty about swapping assets
• SIRF tgt raised to $38 from $34 at RBC
• U.S. Steel target raised to $113 from $104 at Goldman
• NYMEX sets daily volume records for natural gas futures on CME Globex
• Paulson says China moving toward more Yuan flexibility but not fast enough
• Altria to spin-off Kraft Foods

long GOOG

Market Under Pressure in Early Trading

The market has opened under a bit of selling pressure. I thought the market hung in very well yesterday, considering the nearly $3 spike in oil prices and the 12% surge in natural gas.

Of course, the FOMC announcement comes out today, so there will likely be some volatility surrounding that event. I don't expect to hear too much from them, but even a hint that economic growth has strengthened will cause market participants to push out their rate cut forecasts, and could hit the market.

It is also month end, but I think the phenomenon of window dressing is far less pronounced these days than it was several years ago.

SIRF is up +21% after reporting a great quarter. I had already taken profits, so I am not enjoying today's festivities. But at least it confirms by bullish thesis, and I will look to get back in on any weakness.

The 10-year yield is flat at 4.87%. And it is still early. I am always more worried about big up openings than down ones.

Investor Sentiment Check

The market is hanging in there pretty well, especially given the nearly $3 spike in oil, which is huge.

The CBOE put/call ratio has been running high all day, currently at 0.97. Moreover, it has been this high for more than a week. That amounts to a lot of put buying, as investors seem to want increasing amounts of insurance in place in the event of a selloff.

I think this should continue to support the market, and that the longer we chop around and consolidate in a sideways fashion, the more likely it is that we see another upside breakout in the market.

Looking at the sector ETFs, energy (+1.8%) is obviously leading the way today, followed by healthcare and financials. Industrials and consumer staples are lagging, and are down -0.25% so far today.

What Will The FOMC Say Tomorrow?

The markets are slightly positive in early trading. The FOMC meeting starts today, with the statement coming out tomorrow. While it is almost assured that the Fed will hold steady on rates, it is less clear what they will say about their bias and policy directive. I think it is likely that they will also hint at the economy gaining some strength, compared to previous statements where they alluded to an economic slowdown.

The 10-year yield is a bit lower this morning at 4.88%. Oil is trading higher, near $54.50, which is lending a bid to the energy complex.

Earnings reports were once again a mixed bag. While Q4 numbers continue to come in okay, corporate guidance for next quarter appears fairly subdued compared with recent quarters. But with the economy hanging in, I am not looking for a big dropoff in earnings growth.

In other news and notes:

• Asian markets rise overnight
• MMM down, hints at slowing global growth
• WFT beats by 3 cents
• Saudis to reduce oil output - WSJ
• CME misses EPS; stock down
• MBI misses by 16 cents
• LXK beats EPS; guides lower
• PG reports in-line results
• WYE misses by 5 cents
• CTXS added to Conviction List at Goldman
• UPS reports in-line, lowers guidance
• UBS raises TGT target to $78

long PG

SIRF's Down Ahead of Earnings

My Stock of the Day is SIRF Technology (SIRF)

The company reports earnings tomorrow, and the stock is down -4% ahead of the event. The stock has been under fairly heavy selling pressure ever since announcing the loss of a contract back in December.


In addition to competitive concerns, there is the worry that the company offers conservative guidance for Q1. This would surely hit the stock further. I sold my remaining shares last week, but would look to use any weakness created by the report to rebuild a position.


I am still very bullish on the company and the outlook for LBS rollouts in 2007.


Other stocks making notable, high-volume moves today include:

• ATRS
• USAP
• VPRT
• HMIN
• DLLR
• FMCN
• KNOT
• CHDX
• POT
• CDWC
• MSTR
• HAR
• BWLD
• SYY
• USG
• PRXL

Investor Sentiment Check

Investor sentiment indicators are still running at fairly bearish levels, despite the bounce in the indexes. Last week, the CBOE put/call average 0.98 for the week.

Here are some current levels:

• The ARMS Index is running high at 1.22
• The CBOE put/call ratio is also high at 0.95 (it was 1.24)
• The ISEE is about average at 147
• The VIX/VXN are both higher

The Nasdaq is outperforming the SPX today, and small-caps are leading large-caps. As far as sectors go, the consumer discretionary and technology sectors are leading, while financials and materials are lower.

Monday Morning Musings

Get ready for a busy week on the news front. The FOMC meets this week, and will release its statement on Wednesday. We will also get a glimpse of Q4 GDP that day. Core PCE prices come out on Thursday, and Friday will be the always important employment report.

Not to mention another busy week of earnings releases. So far this morning, stocks are mixed. Oil is down slightly, and so is the yield on the 10-year Note (4.87%).

There was no economic news this morning, and hopes for a near-term rate cut by the Fed are being pushed out as recent data points to an economy that may be gaining strength, as opposed to losing steam as many had been predicting.

In other news and notes:

• MAT beats by 9 cents
• ATHR enters bluetooth market
• ATRS being bought by SYMC for $33
• SYY reports in-line earnings
• TSO beats earnings by 40 cents
• BOW and ABY to merge
• GOOG tgt raised to $550 at Oppenheimer
• KSS upgraded to Buy at AG Edwards ($86 tgt)
• GYMB announces $50M buyback
• CSCO estimates raised at RBC
• AAPL target raised to $135 at Needham
• NFLX downgraded to SELL at Roth

long AAPL, GOOG

Investor Sentiment Check

The market has attempted to bounce a couple times today, but has not made it back into positive territory. The Nasdaq was briefly in the green, but is now down again.

Investor sentiment is flashing some signs of elevated bearishness:

• The volatility indexes (VIX/VXN) are up again today
• The ARMS Index is slightly above-average at 1.10
• The CBOE put/call is elevated at 1.01
• The ISEE is around average at 145

I think the market will stabilized into the close. Beyond that, although the market appears to be struggling a bit, I am not expected protracted weakness. I think a sideways to slightly downward consolidation will set us up for another move higher, as the market continues to stairstep to new highs.

More Weakness in Early Trading

The market is again under pressure in early trading. Yesterday's selloff was nasty, and pushed the COMP back below its 50-day average. Lower volume for the day avoided another day of distribution, but if the Nazz can't recapture this key moving average, it could mean a longer correction.

One of the culprits of yesterday's selloff was rising bond yields. And the 10-year yield is up again this morning, to 4.89%. This is now above the highs from last September and October. It would seem that the next stopping point is the psychological 5.0% level, though I'm sure there will be bumps and detours along the way.

Earnings reports from Microsoft (MSFT) and MEMC Electronics (WFR) were good and their stocks are trading higher.

Oil is trading higher this morning ($55), which is helping the energy stocks. And the semis are up in a down market, which could be a good indicator.

In other news and notes:

• Asian stocks drop overnight
• Durable goods +3.1% vs. +3.5% consensus
• New Home Sales 1120k vs. 1050k consensus
• TM is Cramer's top international stock
• Citi downgrades CSCO to Hold
• HAL beats by 4 cents, revs also higher
• FBR cuts target on SU to $85
• Goldman resumes T with Buy
• Raymond James starts NIHD with Strong Buy ($85 tgt)
• Merriman bullish on ELOS ahead of qtr.
• Piper raises WFR target to $61 from $46

long ELOS, GS, MSFT

What's With All The Selling?

It's amazing how fickle investors can be. Yesterday, it looked like stocks were going straight up. Today, it seems like the opposite is true.

Bond yields are rising significantly, with the 1o-year yield up 6 basis points to 4.86%. The market doesn't like rapidly rising rates, so this is an obvious headwind. But considering the weakness still present in the housing market, I don't think growth is about to reaccelerate meaningfully.

Measures of investor anxiety are also spiking today:

• The VIX is up nearly +15%, above its 50-day
• The ISEE is well below average at 112
• The CBOE put/call is spiking to 1.26, a very high level

Hopefully, these bearish indicators will lend some support to the market's slide, and we will see some attempt at a bounce into the close.

PG Makes Tuck-In Acquisition

The other day, Proctor & Gamble (PG) announced the acquisition of HDS Cosmetics Lab from private equity. This company makes the DDF skin care creams. My wife loves these products, and I have to say that I also use it from time to time as well.

Maybe I've been in LA for too long, but it is shocking how much all of these facial creams cost, and that consumers don't bat an eyelash when buying them.

While this acquisition is small, I think it is a growing area and PG should do well there. This looks like a smart acquisition that will help the company start to build some scale in this area.

long PG

Mixed Open For The Market

The market is opening mixed this morning, with a slight pullback in the SPX and a rally in the NDX. The latter is being helped by gains in QCOM and EBAY, both of which reported earnings last night and received positive reactions from investors.

Existing Home Sales came in a little weaker than expected, pushing out hopes that the housing market has seen a bottom. Homebuilder NVR also reported earnings that were well below expectations.

Oil is a bit lower today, even as it continues to hover around the $55 level. Coal stocks are extremely weak after some bearish reports. And bond yields continue to rise, with the 10-year gaining another 3 basis points to 4.83%.

Yesterday was a big day for the Nasdaq, with rising volume making for a strong accumulation day. People have been awfully quick to give up on tech leadership, but I am not leaving the table yet.

Standout Stocks

My Stock of the Day is Focus Media (FMCN)

The stock is spiking higher today, breaking to new highs on surging volume.

This stock has been the focus of my SOTD in the past, and I admit that I was stopped out of my long position late last year. So today's rally is somewhat bittersweet for me. I am not sure why I never got back into this stock.

The market is closing at its highs for the day, after another late afternoon push. Volume is strong on the Nasdaq, making for a nice accumulation day.

The brokers were strong today (+2.0%), followed by semis (+1.2%) and materials (+1.0%). The biggest laggard today is the industrial sector, which is being hit by earnings reports.

Other stocks making notable, high-volume moves include:

• LDSH


• PWR


• EZPW


• LTM


• AMG


• ATNI


• BLK


• CGNX


• SAP


• QLGC


• ROK


• PTV


• MWRK

Investor Sentiment Check

The markets have been hanging in well so far today. Growth stocks are back in the drivers seat, aided by tech stocks, with the NDX +1.4% vs. the SPX at +0.4%.

Oil is only down slightly, hovering just below $55. And measure of investor sentiment are slighltly elevated:

• The ARMS Index is around average at 1.03
• The CBOE put/call is slightly above-average at 0.94
• The ISEE is down -23% to a low level of 106

The elevated put/call ratios should support the market into the close. The SPX made a new yearly intraday high today, and the COMP is bouncing strongly off of its 50-day.

Govt. Threw A Wet Blanket On Yesterday's Rally

Yesterday was shaping up to be a solid day before the DOE announced their intention to double the strategic petroleum reserve. That caused oil to spike higher, touching $55, and taking the steam out of the building rally.

The markets still finished positive on the day, but the Nasdaq gave back most of its gains. The 10-year yield also rose, and is now at 4.80%. This is close to the October highs of 4.85%, where we could see some resistance come into play.

This morning, the markets are getting another bounce on the heels of some good earnings reports. YHOO talked about its new Panama search algorithm, which will go live on Feb. 5th. YHOO has been lagging in the Internet space, so this is a welcome development. But I still think it is going to be hard for them to catch up to GOOG.

In other news and notes:

• Asian markets up overnight
• CTXS spikes +8% on earnings
• APD beats estimates, raises guidance; stock gaps up
• GLW reports solid earnings; stock +10%
• Goldman downgrades YHOO to Neutral
• TWP says Macau gaming has been strong in Q4
• ROK beats by 6 cents; stock lower
• QLGC also reports solid earnings; stock lower
• PWR raises Q4 guidance
• AMD reports weaker results than expected
• BRCM finishes financial restatement ($2.2 bln)
• CLZR gaps lower on earnings miss

long GOOG

Investor Sentiment Check

The markets are building on their early gains. Mid- and small-caps are leading the way, up more than +1.0%. Homebuilders are the leading group, followed by energy. Brokers and biotechs are still lower.

Investor sentiment is mixed so far:

• The ARMS index is around average levels (0.93)
• The ISEE is also at average levels (151)
• The CBOE put/call is elevated at 0.97, reflecting heightened bearishness

Also, the UBS Investor Optimism poll this morning had a reading of 103. This is the highest level since 2004, so it bears paying attention to. That said, within the survey, only 37% of those polled expect the Dow to finish higher in 2007.

Mixed Open For Stocks

Yesterday was another down day in the markets, but volume ran below Friday's levels, so we avoided another distribution day.

We are in the heart of earnings season, and company reports really seem to be affecting the action in the overall market. Last night, TXN reported a quarter that wasn't as bad as many had feared, and this is helping the semis bounce this morning.

UTX also reported a strong quarter this morning, and this is giving a lift to the Dow in early trading. With so many reports coming out, and big overreactions in both directions on the part of investors, this is a tough week to trade and initiate new positions. Better to let the dust settle and discern the winners from the losers.

Oil had a surprising reversal yesterday, after running up to the $53 level, it closed lower on the day. This morning it is back up to that $53 level. This is lifting the energy complex, while brokers and biotech are seeing selling.

The 10-year yield is up slightly to 4.78%. The dollar is weaker this morning, but it has been strong for several weeks now.

In other news and notes:

• Asian markets flat overnight
• NCC misses by 5 cents; stock up slightly
• FBR upgrades URBN to Outperform ($30 tgt)
• SIMO profiled in IBD
• BLK reports in-line, raises guidance
• COH beats by 3 cents; stock falls slightly
• EMC beats EPS, raises guidance; stock down
• ENR beats by 20 cents; stock gaps higher
• Pru ups target on MA to $130

long URBN, UTX

Standout Stocks

My Stock of the Day is Energy Conversion Devices (ENER)

The stock got a big upgrade today, with the analyst putting a whopping $65 price target on it.

One of its big customers, who had delayed some orders, is said to be resuming shipments. Also, rumor is that Wal-Mart has issued some RFPs to the company.

It also has its phase-change memory unit, which could offer upside to this year's estimates. I also think the stock may be benefitting from sentiment ahead of the President's State of the Union speech, where he could talk about alternative energy initiatives.

Other stocks making notable, high-volume moves include:

• USAP


• VIP


• MICC


• EDU


• JCI


• DSW


• WRLD


• RNR


• AXR


• ALD


• CENT


• ETN


• UA


• BRLI


• COO


• SIGM

long ENER

Investor Sentiment Check

The market remains under heavy selling pressure as we approach mid-session. The NDX is down -1.3%, and the semis, retailers, and industrials are also all down more than 1%.

Measures of investor sentiment are slightly elevated, though not dramatically.

• The volatility indexes (VIX/VXN) are spiking +6%
• The ARMS Index is at above-average levels (1.20)
• The CBOE put/call is slightly elevated, at 0.92
• The ISEE is around average levels (147)

The market is still trying to find some sort of intraday bottom. I am looking for stocks to trim some of their losses into the close.

Monday Morning Musings

After a fairly sharp pullback last week, the Nasdaq is under pressure again this morning, trading down nearly -1% in early trading.

Of course, since I always complain about strong opens, I have to say that it is still early and this weakness could certainly fade by the close.

Energy stocks are bouncing again as oil spikes higher, and is testing the $53 level. Natural gas is also above $7. Bond yields are slightly lower, with the 10-year yield at 4.76%.

This week also brings some housing reports in the form of Existing Home Sales on Thursday and New Home sales on Friday. It will also be a very, very busy week for earnings announcements, which always has the potential to add volatility to individual names reporting.

In other news and notes:

• Asian markets rise overnight
• Bear raises target on AMGN to $83
• ETN beats EPS, lowers guidance; stock lower
• GOOG in talks to acquire videogame ad company
• Founder of SWFT to take company private for $31.55/sh
• PETS misses EPS; stock gaps lower
• Wachovia expects ISRG to top estimates
• India looking to get in on gaming craze
• Goldman reits bullish thesis on energy sector
• UBS cuts estimates for DELL
• EFUT announces new contract with J&J
• IBD reports heavy discounting of RIMM Blackberrys
• Piper upgrades URBN (sets $28 target)
• Sun close to a deal to use INTC chips

long AMGN, GOOG, INTC, ISRG, JNJ

Standout Stocks

My Stock of the Day is Nice Systems (NICE)

The stock has recently emerged from a correction that began just before Thanksgiving. After a brief dip below its 50-day average, it has now recaptured that key level.

Today, the stock is rallying strong, and looks poised to break out to new highs soon.

Other stocks making notable, high-volume moves include:

• USAP


• TELN


• CXW


• DIGE


• CLB


• MICC


• CWTR


• AZZ


• TXT


• IBM


• TWB


• GLYT


• ZOLL

Investor Sentiment Check

Measures of investor anxiety are only running at about average levels today. Underlying breadth in the market is positive, which could bode well for the market as we head into the close.

• The volatility indexes (VIX/VXN) are both lower on the day
• The ARMS Index is around average at 1.00
• The CBOE put/call is about average at 0.85
• The ISEE is running below average at 136, showing modest bearishness

Housing stocks are getting the biggest boost, and have had a good week. Semis are bouncing back from yesterday's shellacking, but making up only a fraction of the losses. And energy stocks are getting a big bounce after being heavily oversold.

Consumer Confidence, Domestic Inflows Improving

The market is mixed in early trading. After touching the $50 level, oil is getting a small bounce, as are the energy stocks. Tech is mixed, though IBM is weighing on the averages.

The Michigan Sentiment poll was strong, coming in at 98 vs. 92.4 consensus. Also, the AMG fund flow data today showed that more funds flowed into domestic funds than international funds for the first time in a while.

The 10-year yield is slightly higher at 4.77%, and the dollar is bouncing slightly also.

Today is options expiration, but I think we likely have already seen most of the fireworks for the week. After a very strong start to the year, the Nasdaq pulled back significantly this week. Tech will likely continue to be a mixed bag during earnings season, but hopefully these negative overreactions will subside.

In other news and notes:

• Asian markets mixed overnight
• CWTR lowers guidance; stock crushed
• IBM reports in-line quarter; stock still falls
• XLNX lowers guidance; stock higher
• SLB beats earnings; stock up
• GE reports in-line earnings; stock lower
• Bear ups GE tgt. to $44
• JDSU raises guidance; stock ramps
• BB&T starts NTRI with Buy ($84 tgt)
• New China land tax could hurt LVS, WYNN

long GE, JDSU

Back-to-back Distribution Days

The Nasdaq got pounded today on rising volume. That makes for a 2nd consecutive distribution day. While this is potentially worrisome, let's not forgot how strong the Nazz has been so far this year.

The COMP is now right at its 50-day moving average, so we'll have to see if it can find some support, or if it pulls back further.

After the bell, IBM reported earnings and its stock is down $5. XLNX also lowered guidance for next quarter, but its stock is already pretty washed out.

Oil is now testing the key $50 level, and although this should be a longer-term positive for the consumer and the economy, it has not yet come through that way in the stock market, although retail was the standout sector today.

Bond yields fell today, with the 10-year closing at 4.75%.

Standout Stocks

My Stock of the Day is actuall the Semi ETF (SMH).

After looking like the semis might break out over triple tops recently, the group has reversed course.

This ETF is getting hammered today for roughly -3.8% on the heels of the earnings report and guidance from LRCX, and investor caution with regard to the whole industry.

The stock gapped lower this morning, and broke through both its 50-day and 200-day moving averages, leaving key support behind. It now looks like the semis will have their work cut out for them, and could be in for a more prolonged correction. Let's hope this is not indicative of what is in store for the overall tech sector.

Other stocks making notable, high-volume moves today include:

• LOGI


• CEN


• TAM


• EMS


• JCP


• ANF


• CAI


• SMTS


• VSEA


• LRCX


• NITE


• NVEC


• MOH


• CYMI

Investor Sentiment Check

Measures of investor anxiety are not as high as I would hope for on a day like today. Maybe that is because it is really tech that is getting hit, while the Dow is actually up on the day.

• The ARMS Index is only at average levels at 1.0
• The CBOE put/call is also around average at 0.87
• The ISEE is low at 113, the only indicator showing rising fear

Also, the recent bull/bear polls (Investor's Intelligence and AAII) show an increasing number of bulls relative to bears. In the short-term, this could be positive if more people are turning bullish. But if complacency gets too high, it likely means that a bigger correction is coming.

Apple Crushes Estimates, Stock Falls

The market is falling under selling pressure this morning, with the Nasdaq leading the way on the downside.

AAPL absolutely crushed estimates last night. Earnings and revenues were well above consensus, gross margins were higher, and the company sold a ton of iPods. The company offered conservative guidance, but everyone already knows management does this. So I am surprised by the drop in the stock. I would look to add to it on further weakness.

Semis are also down this morning (-2.8%) on the heels of a weak LRCX report. Retail stocks are bucking the weakness.

The CPI inflation data was mixed this morning, even though the drop in energy prices should soon begin to show in the data. Nonetheless, this pushed up bond yields to the 4.79% area.

After the extreme outperformance by the COMP over the last 2 weeks, a pullback should not be surprising. The volatility could also be exacerbated by options expiration tomorrow. So far, we have seen mostly negative reactions to earnings reports, but this does not change my longer-term view that growth stocks (including tech) will have a strong year.

In other news and notes:

• Asian markets rise overnight
• Bernanke testifies about budget deficit problems
• CAL beats earnings estimates
• UNH doesn't report EPS; stock falls
• JPM downgrades AAPL
• BofA raises AAPL tgt to $107; Amtech $115
• Merriman starts TSCM with Buy
• Walt Mossberg previews Vista
• MER crushes consensus estimates
• BGG misses EPS estimates; guides lower
• GES ups Q4 EPS guidance
• Lehman raises ANF target to $85
• GOOG files outdoor display patent

long AAPL, GOOG

Standout Stocks

My Stock of the Day is Intuitive Surgical (ISRG)

After getting deeply oversold at the beginning of the year, the stock is starting to bounce back.

Today, it is bucking the overall weakness and putting in a solid day. I expect this excellent growth stock to continue to recover as the year unfolds. Management is known for giving conservative guidance, but maybe they can try to be just a little promotional, just for once.

Other stocks making notable, high-volume moves include:

• ZOLL


• ASMI


• PAY


• HMIN


• BDC


• CROX


• TMO


• GMKT


• RACK


• BLKB


• NTRS


• NDE


• INTC


• FUL

long INTC, ISRG, GMKT

Inflation Data Spooks The Market

The market is opening under a bit of selling pressure, after a pretty strong inflation report. The year/year PPI rate hit 2.0%, for the first time since Sep. 2005. But this data is volatile, and could easily reverse direction next month.

Oil is trading lower once again, breaking below the $51 level. T. Boone Pickens was on CNBC and said that while the depth of the recent decline surprised him (his fund is down -6%), he thinks we are at the bottom.

The energy stocks are trading higher, not surprising given how oversold many of them are. The 10-year yield is flat at 4.75%.

RACK is down a whopping -35% after warning that Q4 earnings would be below expectations. That is quite a haircut. The last time this happened, last summer, the stock later enjoyed a 100% bounce off its bottom.

INTC reported solid earnings, but offered tepid gross margin guidance. This, couple with some profit taking, has the stock lower this morning to the tune of -4%.

In other news and notes:

• Asian markets rise overnight
• HANS featured on Barron's Online
• LEN guides FY07 EPS above consensus
• WIT beats EPS by 2 cents; revs +46%
• Goldman upgrades PG to Buy
• Amtech starts NVT at Buy ($44 tgt)
• HMA announces special $10 dividend
• Wedbush raises CROX target to $55

long GS, INTC, PG

Investor Sentiment Check

Investor anxiety is running above average today. The volatility indexes are up (VIX/VXN), and the ARMS Index is elevated as well.

As for the put/call ratios, the CBOE put/call has been running above 1.0 all afternoon.

The ISEE is the only one not confirming this, with an elevated reading of 181. It also touched 200 this morning for the first time in months.

Overall, the market is still hanging in okay. Energy stocks are under heavy selling pressure again as oil continues its recent plunge. It is now getting close to the $51 level. Investors are also likely jittery over the start of earnings season.

Will The Nazz Pull Back This Week?

The Nasdaq is off to an incredibly strong start to the year already. Given the large moves, it is normal to wonder if the market pulls back this week. Earnings seasons starts in earnest today, so this could be a natural time to take profits.

That said, the market is not even close to overbought judging by the oscillators. If Intel (INTC) and Apple (AAPL) report strong earnings, this could help things.

I thought it was interesting when reading Barron's Roundtable this weekend that none of the participants really seemed all that bullish. Half were expecting a flat year, and the other half seemed to be looking for something like +6-8%. And no one really talked much about the possibility of multiple expansion. I, for one, am in the double-digit gains camp.

Oil is down again this morning, which is weighing on the energy complex. The 10-year yield is off slightly to 4.75%, following last week's big runup.

In other news and notes:

• NFLX offering new streaming video service
• BofA downgrades CSCO to Neutral ($30 target)
• CTX lowers Q3 guidance; cites difficult conditions in housing
• Castro reportedly in 'grave' condition
• SIRF downgraded to Neutral at Oppenheimer
• ANF upgraded to Overweight at Pru ($89 tgt)
• HW beats estimates; stock lower
• SYMC lowers Q3 guidance; stock -7%
• WFC reports in-line EPS, revs above consensus
• NY Empire Index 9.1 vs. 20.0 consensus
• NCR raises guidance
• LVLT downgraded to Sell at Janco ($5 target)

long AAPL, INTC, SIRF, WFC

Strong Into The Close

The markets have firmed up in the afternoon session and look poised to close at their highs for the day. This will cap a very, very solid week for the Nasdaq.

Of course, if you look back (as I did), last January we saw a similar start to the Nazz. But then in the 3rd week of January it got whacked hard. Let's hope we don't see a repeat performance.

Now I'm going to go enjoy a prosciutto panini with my name on it. Small pleasures.

Breakout or Fakeout?

Yesterday, the COMP broke out to new highs, clearing a roughly 7-week consolidation. Volume was very strong, making for an accumulation day as well. This makes for a solid breakout.

If this were last year, it is likely that we would see the breakout quickly reverse itself, and make those who bought on the breakout feel foolish.

But I think this year will be different, and that this breakout will stick. As we get into earnings season, volatility will obviously pick up, but I think there is just enough bearish sentiment still around to help us push higher before a correction sets in.

I think the fund flows out of energy/commodities/emerging markets and into growth/tech are just beginning, and we should see additional rounds of this type of sector rotation as the year progresses.

TGIF

After the week I've had, I'm looking forward to the long weekend. Although you know if you have babies and toddlers that weekends are no longer about rest! Ugh.

Retail sales beat expectations this morning (+0.9% vs. +0.7% consensus). This is helping push bond yields higher, with the 10-year trading up to 4.76%.

Oil is getting a bounce (finally), and there is more rumors about an emergency OPEC meeting. Of course, OPEC hasn't been able to support prices during the last 6 months, so why would they have any newfound success.

Nonetheless, the energy patch is bouncing, with most industries participating. Tech is also slightly higher, but semis are lagging again today. Biotechs and homebuilders are the strongest groups so far today, after energy.

In other news and notes:

• Asian stocks rise sharply overnight
• More scurtiny of options grants at AAPL
• Samsung reports mixed Q4 results
• MIDD featured in IBD's New America
• BofA ups INFY to Buy
• Citi starts BTU with Buy ($48 tgt)
• Multiple downgrades of SAP following weak results
• LVLT exchanges convertible debt for equity
• MCD could sell Boston Market (remember that IPO?)
• Piper raises CROX target to $54
• BofA raises AAPL target to $105
• AMD lowers guidance due to price competition
• Cowen bullish on ISRG after slide
• Punk Ziegel raises LEH target to $91

long AAPL, BTU, ISRG

The Schmeissing Continues

The sharp drop in oil is continuing today. Oil is down over -3% today, falling below the $52 level for the first time since June, 2005.

Looking at the oil ETF (USO), it is now down over -14% ytd. That is a huge move in such a short period.

While longer-term, a drop in energy prices is bullish, the speed of the move is causing some dislocations in the market that I believe are spilling over and causing some weakness is the broader market.

Investor Sentiment Check

Investor sentiment guages are mixed currently.

• The CBOE put/call ratio is slightly below average at 0.69
• The ISEE is about average at 145

I am surprised given the strength we have seen in growth stocks so far ytd, that there have been no ISEE readings near 200. Yesterday was the real shocker, as the ISEE traded well below 100 during the day, before finishing at the still low level of 103.

This, coupled with the fact that the COMP is just getting out of oversold territory, indicates that this rally could still have room to run before the COMP gets overbought.

More Outperformance For Growth Stocks

Yesterday was another solid day for growth investors. The Nasdaq outperformed the SPX again, as money flowed out of the cyclical and commodity complex and into larger-cap growth stocks. This is a theme I believe has legs.

The market is higher again at the open. Energy stocks are getting a little bounce after the pounding they have taken. Biotechs are also getting a big bounce after DNA reported solid results.

Bond yields are drifting higher again, with the 10-year yield climbing to 4.71%. This is above the December highs, with the next area of high ground last October's highs near 4.85%. The Bank of England raised rates by 25 bps last night to 5.25%, citing wage inflation as a concern.

In other news and notes:

• Asian markets lower overnight
• WSJ reports EOP may be in play for higher bid
• THQI guides Q3 EPS above consensus
• INFY beats by 2 cents; stock higher
• MA profiled in IBD's New America
• CSCO claims AAPL infringed on iPhone trademark
• Stifel raises estimates for JSDA
• ENER is top pick of Jeffries for 2007
• EBAY buys StubHub for $310 million
• Goldman raises Q4 estimates for GOOG
• Punk Ziegel raises GS target to $242
• BEAV wins 9 orders for over $200 million
• COP reports weak reserve replacements

long AAPL, BEAV, GS, GOOG

Standout Stocks

My Stock of the Day is VistaPrint (VPRT).

The stock is breaking out of its recent consolidation on a huge spike in volume. There is no real news that I see to account for the move.

This is a stock I have been watching, but do not own it yet. Looking at the technicals, it looks to be reaching fairly overbought levels. So I am inclined to wait for a pullback at this point.

Other stocks making notable, high-volume moves include:

• AAPL


• SIMO


• GMKT


• SPWR


• ICON


• FMCN


• CROX


• HANS


• ZUMZ


• NUCO


• JCOM


• EGLE


• OXM


• SNP


• LFC


• UIC

long AAPL, GMKT

Looking For Signs of Strength

The market is opening under selling pressure. Oil is down again, testing the $55 level, and this is weighing on the energy complex. Emerging market stocks are also down again, and this is likely spilling over onto our markets.

The declines in oil, commodities, and emerging markets since the beginning of the year have been sharp, which often happens after a trend gets too extended. I suspect we will see a rally in those markets at some point, as they are now getting oversold.

The U.S. trade deficit narrowed in November to $58.2 billion ($59.5 billion consensus), its lowest reading since July 2005.

The SPX and COMP are now testing their respective 50-day moving averages. It's too early to say if a breach will lead to a more prolonged correction, but these are key levels that bear watching.

In other news and notes:

• Lots of upgrades and tgt price raises for AAPL
• Asian markets fall in overnight trading; Europe also
• KMX profiled in IBD's New America
• GTRC lowers Q4 guidance
• CIBC says FORM is top idea for 2007
• CPKI guides Q4 above consensus
• Amtech starts PSPT with Buy ($30 tgt)
• IMCL +7% on Erbitux news
• USNA +6% on raised Q4 guidance
• JCOM -12% on lowered guidance

long AAPL

Jobs Sandbags the Daytraders

It seems like some folks were too trigger happy with AAPL today. CEO Steve Jobs started out by saying, "we're only talking about the mac today". That launched a flurry of selling, as many had anticipated product announcements about the iPhone, etc.

AAPL traded all the way back down into negative territory before Jobs got around to the good stuff. He then introduced the iPhone, calling it a revolutionary product.

He also announced the Apple TV (formerly iTV), and said the company would partner with Paramount for movies. Also, content from iTunes could be transmitted wirelessy to the Apple TV.

The products look really snazzy, and it didn't take long for the stock to ramp higher. It is currently up $4.30 on the day. All I can say to those who sold it on that first headline is, "Doh!".

long AAPL

Back At Half Speed

Did anyone see that truck? I got hit by a nasty stomach flu bug yesterday, and have been in bed ever since. That is why there were no posts following my opener yesterday. There is no worse feeling than the fever with nasuea combo.

I'm still far from 100%, but can't keep myself away from the market that long.

Monday Morning Musings

The market is bouncing around the flat line in early trading. It opened a bit weak after one of the Fed governors gave a speech, but then rebounded some.

Oil is up by more than $1 this morning, which is helping the energy stocks. Bond yields are also ticking higher, with the 10-year yield at 4.66%. This is still below December's high yield of 4.71%.

I just read that Bill Miller of Legg Mason is so bullish for 2007 that he is borrowing money to buy more stocks for the first time since 2002. Could that be because he just had his worst year of relative performance in a long, long time?

Last week was an intersting one in that growth stocks significantly outperformed. It was obvious that money was flowing out of the commodity trade and into more traditional growth stocks. I think it will continue, but this process will take time.

In other news and notes:

• Do you have any idea how many times I watched The Wiggles this weekend?
• Go Buckeyes tonight!
• Google signs deal with Samsung for mobile products
• BRLC raises guidance; gaps higher
• CMX rejects bid by ESRX
• Asian markets fall overnight
• Big UBS upgrade of tech stocks
• UNH will reaffirm guidance at JPM conference
• CIBC bullish on WFR
• NCR announces plan to split company
• MOLX lowers Q2 guidance
• BofA bullish on CTSH, Indian BPOs
• GRMN downgraded at DA Davidson

long GOOG, O State

Standout Stocks

My Stock of the Day is NYSE Group (NYX).

The stocks gapped higher this morning, and has built on its gains throughout the session. Volume is also spiking to a multi-month high.

Of course, the catalyst for today's move was Cramer hyping the stock on Mad Money as his #1 growth pick for 2007.

Other stocks making notable, high-volume moves include:

• GROW


• RBN


• CNS


• DIGE


• ICE


• HMIN


• GOOG


• HLF


• GPN


• RNOW


• HWAY


• PNK


• FXI


• LFC


• NRMX

long GOOG

Commodities Selloff Spills Over

The commodity complex is getting whacked again today. Gold is breaking down hard, while the dollar is rising.

This mix is likely wreaking havoc on large hedge funds that have been long gold and commodities and short the dollar. There is likely margins calls going on that are spilling over and creating weakness in the broader market.

In situations like these, funds often sell whatever they can to meet the margins calls. And that means stocks.

Jobs Report Stronger Than Expected

The market is opening under some heavy selling pressure. The catalyst was the stronger than expected jobs report.

Nonfarm payrolls rose +167,000 vs. expectations for +100,000. While stronger economic news is usually bullish, the market is really hoping for the Fed to cut rates in the near future. And every piece of strong economic news makes it less likely the Fed will move to cut rates.

The bond market didn't react well either, as the yield on the 10-year T-note is rising 6 basis points to 4.67%.

Oil has now fallen all the way down to $55.50, down roughly -10% ytd. This has led to a huge 2-day shellacking in the energy stocks, though they now look a little oversold.

Utilities are down the most so far, while retail and biotech are the only positive sectors. But its still very early. I wouldn't be surprised to see much of this weakness fade by the close.

In other news and notes:

• Asian stocks fall overnight
• APKT profiled in IBD's New America
• N. Korea prepping another nuclear test
• PCCC downgraded to Peer Perf. at Ray James
• Jeffries names AMAG a top biotech pick
• BBY reports strong same-store sales (+7%)
• FBR puts target for BEAV at $33
• Soros fund bought JCP, KSS
• MOT gets crushed after lowering guidance
• Oppenheimer bullish on YHOO
• HANS is Top Pick of 2007 for Longbow
• Brean Murry puts BRLC target at $18
• UBS starts SIRF at Buy ($33 target)

long BEAV, SIRF

Sentiment Check

The Nasdaq continues to rip, especially relative to the broader market. This is likely indicative of money flowing out of the energy complex and into tech and biotech.

As for investor sentiment, it has been subdued all day.

• The ARMS index is elevated at 1.32
• The CBOE put/call is above-average at 0.92
• The ISEE has been low all day, opening at 81, and now at 120
• The NYSE short interest ratio is at a 5-year high (7.13)

I expect this trend to continue, with some interruptions along the way. Growth stocks are poised to outperform, a welcome change from the last several years.

Retail Sales Roundup

At first blush this morning, I thought the retails sales picture was soft. But for the retailers that I follow, the results weren't really that bad, at least compared to expectations.

Here is a rundown of some of the names, and their same-store sales results (vs. consensus):

• ANF: -1.0% (vs. -2.4% consensus)
• AEOS: +13.0% (vs. +8.3%)
• CHS: -2.0% (vs. -2.8%)
• COST: +9.0% (vs. +5.9%)
• CVS: +8.5% (vs +7.2%)
• GYMB: +15.0% (vs. +4.7%)
• JWN: +9.0% (vs. +4.3%)
• ZUMZ: +11.5% (vs. +5.1%)
• JCP: +2.6% (vs. +2.4%)
• KSS: +3.0% (vs. +3.0%)
• PNRA: +1.5% (vs. +1.2%)
• PLCE: +5.0% (vs. +8.0%)
• CTRN: -0.1% (vs. +2.8%)
• GPS: -8.0% (vs. -4.6%)
• TGT: +4.1% (vs. +4.4%)
• WAG: +7.9% (vs. +9.5%)

long CHS

Volatility Rears Its Head

The intraday volatility in yesterday's session was pretty surprising. If you merely looked at the closing levels of the indexes, you have no idea what took place in between the bells.

The NDX showed the most volatility. From its high to low points during the day, it showed a 3.5% swing. Of course, it still managed to eke out a gain for the day.

2006 was notable for its lack of volatility. I know some are saying that 2007 will not be a repeat, and that volatility will show a noticeable pickup. Was day #1 for the year an early warning sign?

Oil is down again today, breaking below the $57 level. This is hurting the energy complex. I can't remember the last time I saw such a large 2-day selloff in energy stocks. Brutal.

Retail sales came out this morning for most retailers. I will have more details later, but for the most part the results were a bit soft. Especially when you hear the companies trying to blame the results on weather.

The NDX is trading just below its 50-day, after trying to recapture this level yesterday but failing. So this battle bears watching.

In other news and notes:

• Fox pulls the plug on The O.C.
• CSCO buys network security firm
• MNST online job index falls in December
• SunTrust believes BEAS will be swallowed
• RBC initiates SIRF with Outperform ($34 target)
• BOOM announces new record for orders
• ARO raises Q4 guidance
• GME raises Q4 guidance; strong holiday sales
• RUTH raises Q4 rev guidance; maintains EPS guidance
• GOOG partners with China Mobile (CHL) to provide mobile search
• Webush starts BRCM with Buy ($45 target)

long GOOG, RUTH, SIRF

Standout Stocks

My Stock of the Day is BE Aerospace (BEAV)

The company came out today and said it will raise its financial guidance when it reports in February. They said that they expect to report record revenues, operating earnings, and backlog. Moreover, the backlog gives them confidence that they will report another record year of financial performance in 2007.

The stock is spiking back above its 50-day today, on rising volume. It is also bucking the major weakness that has developed in the market.

Other stocks making notable, high-volume moves include:

• LAYN


• LFC


• CHL


• BMC


• CHIC


• KMX


• TTM


• RL


• TTI


• SJT


• VE


• AXE


• XRTX


• CNX


• ARTC


• WFT

long BEAV

Nasty Turnaround In The Market

The FOMC minutes were just released, and although the markets were already trading off their early morning highs, the release seems to have sparked a pickup in selling.

The comments seemed like more of the same to me. The Fed members said the downside risk to growth had increased. But inflation remained 'the prominent concern'. Recent indicators provided mixed signals about near-term economic strength. And that housing does not appear to have significantly spilled over into consumer spending.

So far, today is another example of why I don't trust strong opens. There was a lot of excitement around the open, and the flurry of buy orders propped up the market. But it didn't last long, and now the SPX and NDX have moved all the way back into negative territory.

If the markets finish like this, it will equate to a nasty, high-volume turnaround day in the market.

Back In The Saddle

The markets are getting a nice bounce in early trading on this first session of the New Year. You know I don't like strong opens, but maybe today can buck the normal trend.

Oil is breaking below $60 this morning, and that is weighing heavily on the entire energy complex. I am seeing red across the board there.

An ADP report on the jobs picture is forecasting a decline of -40k jobs this month, which would be a surprising decline. This is pushing bond yields lower, with the 10-year plunging 5 basis points to 4.66%.

The ISM Index was stronger than expected at 51.4 vs. 50.0 consensus.

In other news and notes:

• KeyBank downgrades the entire drilling sector
• Sun Trust ups URBN to Buy ($27 target)
• Goldman downgrades semi equip stocks to Sell
• Soleil ups AAPL target to $100; Merril to $102
• Piper ups GOOG target to $630
• CEO of Home Depot resigns; stock trades up
• LEN issues downside guidance for Q4
• WMT reports same-store sales +1.6% for December
• TWP lowers estimates for BRCM
• SIA expects +10% chip growth in 2007

long AAPL, GOOG

The Results Are In!

Each year I take a sampling of portfolio managers and ask them for their forecasts for the year ahead. The 2 questions they are asked are where will the S&P 500 (SPX) finish in the year ahead? And where will the yield on the 10-year T-note finish?

Congratulations to Cody Willard, my friend and colleague at TheStreet.com for his winning prediction. Cody estimated the SPX would end the year at 1420 (it finished at 1418), for a bullish +14% return.

To put that in perspective, the average of all the investment managers surveyed was a forecast for a modest +2.4% return. So at the time, Cody was going out on a bit of a limb. Although there were a few more bullish forecasts that his, there were far more that were less bullish.

And I would also like to give a shout out to Sean Mueller of MCM in Denver for his bond prediction. Sean said the 10-year yield would finish at 4.7%, which is exactly where it finished!

Now that he is completely snowed in, he can focus all his attention on fine tuning those algorithms to come up with another fabulous forecast.

Congrats to our winners. As usual, the winning prize is dinner on me. All you have to do is come to LA to collect. And to those of you who said that the SPX would finish with a 10-handle on it, better luck this year.

I am now compiling forecasts for 2007. If you are a portfolio manager, please send me your predictions. Good luck!

Mutual Fund Monthly

Looking at the funds in our mutual fund program, the only clear trend was that international funds clearly outperformed domestic funds. Beyond that, the results were pretty much mixed, with good managers putting up solid performance regardless of asset class or style.

Here are the top and bottom five funds:

Top 5

• DREGX (+41.2%) - Driehaus Emerging Mkts
• TREMX (+34.7%) - T.Rowe Emerg. Europe
• TGVAX (+25.6%) - Thornburg Intl. Value
• ARTIX (+25.6%) - Artisan International
• BPTRX +21.6%) - Baron Partners Fund

Bottom 5

• CVTRX (+9.8%) - Calamos Gr. & Income
• SWHIX (+9.4%) - Schwab Hedged Equity
• PRNHX (+7.4%) - T.Rowe New Horizons
• QUAGX (+5.1%) - Quaker Strategic Growth
• TEQAX (-3.9%) - Touchstore Large Cap

One standout fund that didn't make the list, but was my best performing bond fund, was Loomis Sayles (LSBRX). Dan Fuss did a great job, and returned +11.0% for the year.

On the disappointment side was a manger I respect very much, Noah Blackstein, whose Dynamic Power American Growth Fund finished the year in negative territory. This fund only trades in Canada, so it's not the easiest to follow. But Bloomberg showed it down for the year.

Trading Resolutions For The New Year

I hope everyone enjoyed the extra long weekend. I haven't fully reviewed my performance for 2006, but it is always a useful exercise. Looking over your trades to highlight both what you did right, and what you did wrong will help you improve your results immensely.

From a big picture standpoint, here are the areas I am highlighting as my Trading Resolutions for 2007:

1. Let your winners run. Take partial profits if you must.
2. Don't average down. Adhere to stop-losses; this will not only save you money, but a lot of time wasted on agonizing over losing positions.
3. Move quickly to take profits/losses when the outlook changes. Don't be complacent and hope for a recovery, or for the stock to come back because it is a "good company".
4. Pay more attention to big price/volume moves. They often go on to become big winners.
5. Run more screens. Look for ideas each day; winning stocks are contstantly popping up.
6. Stick to your buy/sell disciplines. Don't buy or sell a stock because of a tip, comment, article, etc., unless it fits in with your investment strategy.
7. Don't out-think the market. The collective wisdom of the market is often right more than any one person's opinions.
8. Don't procrastinate. Be proactive. Time is money, and opportunity costs can hurt performance.