Friday, February 01, 2008

Another Strong Rally To End A Very Good Week

The market rallied again into the close, capping one of its best weeks in several years. Of course, it is too bad that it had to come in the worst start to the year since 1990. But I think the big Fed moves should help investor psychology, as well as the renewed strength in financials.

The MSFT bid for YHOO was the big news of the day, and YHOO stock surged +48%. But every group participated today, even the energy stocks (despite oil moving down again).

The semiconductor ETF (SMH) rose +7.4% today. That is HUGE. I can't remember the last time it has such a big move. That should help boost sentiment in Asia over the weekend.

And homebuilders rose again today (+2.46%), after a weak jobs report helped push bond yields lower. The 10-year yield finished at 3.60%, and these low yields are leading to a surge in refi activity. This is important, and really helps alleviate the negative sentiment in the homebuilders.

Oil and gold were both down big today, as the bloom seems to be coming off of the commodity rose. Some of this weakness likely stems from China, whose market has not bounced back like the U.S. did this week. If China continues to weaken, it could alter many of the global growth themes that have been driving certain groups of stocks. So this bears monitoring.

Here are some stocks that had huge moves today on surging volume:

The S&P 500 is approaching the 1400 level, where I think we could see some initial resistance. And another area I would watch, if it gets through 1400, would be the downsloping 50-day moving average.

I am still of the mindset that the market will experience some sort of retest of the lows at some point, but the swift move of 125 bps of rate cuts by the Fed in just 10 days time lessens my conviction, and makes me more likely to want to buy future dips.

long MEE; short GLD


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