Monday, December 31, 2007

Last Trading Day of the Year

The markets are down in early trading on this last day of the year. I am a bit surprised, as I thought that big funds would be net buyers as they anticipated new money coming in on Jan. 1. Let's see if some of this buying shows up later in the day.

Bond yields are lower again today, with the 10-year back down to 4.03%. The bond market is signaling its worry with the disinflationary effects of the credit crunch, even as the Fed heads ignore it and continue to talk about inflation. Silly.

Asian markets were mostly higher overnight, save for Pakistan which plunged following the Bhutto assasination. Oil is also lower again, falling back to $95. I think oil will hit $100 early next year, and that will mark the high for the year.

The ARMS Index is very high this morning (1.44), indicating heavy selling pressure. The Yen is also higher, which has been a great "tell" about how the markets fare in the short-term. The market has not been able to rally on days when the Yen is moving higher.

If the market closed here, the S&P 500 would finish +3.5% for the year.

I'll be back with some 2008 predictions later.

Friday, December 28, 2007

Pretty Quiet Day Ahead Of Weekend

The market had a pretty unspectacular close today, with most indexes near the flat line.

For the week, the S&P 500 declined -0.40%. Yesterday's selloff pretty much erased the last few positive days in the market. One thing I don't really like to see is the action of the 10-year yield (above).

The dropping yield indicates that market participants are back to worrying about economic growth in the future. A one to two-day drop isn't all that bad, but I don't want to see the weakness continue, and don't want to see the yield drop back below 4.00% again.

Also, the rally in oil is probably worrying many. Oil is closing in on that psychological $100 level that will get inflation hawks freaking out again (although it reversed lower today).

Monday is the last trading day of the year. Gun to my head, I would say it will be an up day in the market. But forecasting market moves that short-term in nature is fairly futile.

Have a great weekend--

Small Bounce After Thursday's Selloff

The market is trying to bounce in early trading, but there doesn't seem to be much conviction behind it. I thought yesterday's selloff was a bit of an overreaction, but it may take more than a day to recover.

Asian markets were lower across the board overnight, after the geopolitical uncertainty raised by the killings in Pakistan. The Yen is higher today, which is also a headwind for the markets.

There was another weak home sales report today, with November new home sales reported to have fallen -9% to a 12-year low. Bond yields are down over the last 2 days, with the 10-year yield back to 4.10%.

And oil continues to run, back over the $97 level, and making a run at the $100 level that everyone keeps harping on. This should help the energy stocks, and also continue to boost the solar names, which have had quite a run.

Last, don't even get me started on Disneyland. After piling the extended Kahn clan into the rented minivan and sitting in traffic to get to Anaheim, we got there and they told us that the entire park was sold out. That's right, sold out. Try explaining that to a bunch of 3-6 year old girls who have been waiting all week to see the princesses. Ugh.

Thursday, December 27, 2007

Heading Out To Walt's Place

The market is lower this morning after some slightly weak economic data, as well as the assassination of former former Pakistan Prime Minister Benazir Bhutto. She was killed by a suicide bomber. Very sad that this stuff still happens.

The market has been up for 6 straight days, so a pullback would not be surprising. And it is likely that whatever the news was today, the market may have pulled back anyway.

Oil is higher, back near $97. I suspect the markets will linger around in negative territory, but not fall too far. Year-end window dressing seems to be in effect, and that means big institutions will likely support their winners.

As for me, I will not be blogging today as I am heading out with my family, parents, brother, and all the kids to Disneyland. I have lived in LA for 8 years and have been able to avoid the park, but all things must end. It's hard enough to get our group to dinner, let alone to navigate a park with thousands of people. Better get my game face on.

Wednesday, December 26, 2007

Ready To Run

Remember that Dixie Chick's song "Ready to Run"? That is the tune that kept ringing in my head as I looked at the chart of (AMZN).

This company reported stellar earnings last quarter, but the stock ran up so much ahead of the report that it had nowhere to go but lower. Since then, the stock has fully recovered, during a difficult market.

Today, AMZN was the only retailer that said that holiday sales were going well. In fact, they said that it was the best holiday season ever for them. Internet retailers are finally garnering a significant share of holiday shares, and AMZN is capitalizing on that trend. I know that I shop on all the time, both for books as well as electronics. I love the site.

And the stock looks poised for more upside action. I think the stock will be back at new highs by the time it reports earnings in January, and I expect that it will report strong earnings again. That makes AMZN my Stock of the Day, and I will be looking for any pullback to buy.

Back In The Saddle

Time to shake off the cobwebs from the holiday and get back to the markets. The market finished at its highs on the short session on Monday, and is slightly lower in early trading today.

The pressure is mostly coming from retail and housing. Mastercard (MA) said holiday shares were up an uninspiring +3.6% compared to last year's +6.6% figure. And Target (TGT) said that December same-store sales will be below expectations. This is pressuring most retail stocks.

The S&P/CaseShiller Home Price Index indicated that home prices fell -6.1% yr/yr, a larger than exected drop.

Oil is up a lot this morning, trading near $95.75. The 10-year yield is flat around 4.20%.

But the ARMS Index is high at 1.24, and the put/call ratio is above the 1.0 level. This indicates anxiety among investors, and should help to keep a floor under stocks today. I would expect some modest declines overall, after 5 straight up days in the market. Not a bad stretch.

Monday, December 24, 2007

Market Starts The Week On A Positive Note

There is little news this morning, on this holiday shortened trading session. The biggest piece of news is that Merrill Lynch (MER) got a $6.2 billion infusion from the Singapore govt. and Davis Selected Advisors. This is helping boost the financials.

Asian markets were up sharply overnight, and the Yen is a bit lower again today. The 10-year yield has bounced all the way back to 4.19%, reflecting an easing of recession fears. And oil is trading down on the day, but still up at $92.50.

There are only 4 1/2 trading days left in 2007. What a wild year. For all its volatility, the S&P 500 is currently up only 5% ytd. Although if this week is nice to the bulls, we could see that figure move a little higher before 12/31.

Now is the time of year where you will hear all sorts of predictions about what's in store for 2008. For the most part, don't listen to them. Forecasting the market that far in advance is full of folly. But that doesn't stop people from participating. All you have to do is go back and look at predictions from year's past to see how hard it is to know what the market has in store for investors.

A better bet is to stay alert, monitor the markets, and take it one step at a time. If the market shows strength, hang in there. And if the market flashes signs of trouble, then you can always get more defensive. I am still watching closely to see if the market can make new highs in the near future. If not, that would market a chance in character for this market. But I continue to give it the benefit of the doubt.

Friday, December 21, 2007

Market Surges In Early Trading Ahead of Options Expiration

The market is up big in early trading, ahead of options expiration today. Research In Motion (RIMM) reported strong earnings last night, and the stock is spiking more than 10%. This is helping the overall tech market also.

Oil is back up over $92, and this is supporting the energy complex. This is a strange market, but the big up days have always had both the tech and energy stocks rising together.

The two indicators that I have been harping on are the Yen and the VIX (volatility index). I have noted that the bulls needed to see both of them continue to move lower to help out this rally. Well today they are doing just that.

The FXY (Yen ETF) failed to get back above its 50-day average, and is breaking below recent support today near $88. The VIX is down a whopping -8%, and has broken below the 20 level. Both of these trends should support the Santa Claus rally into next week.

Asian markets were up across the board last night. And the 10-year yield is up to 4.10%, indicating an easing of recession fears.

long RIMM

Thursday, December 20, 2007

Market Wrap

The market rallied hard into the close today, closing at its highs. Volume also rose on the day, a welcome sign, as this makes for the 2nd accumulation day this week.

Volatility fell again today, with the VIX declining -5%, and getting closer to breaking below that 20 level that often coincides with an uptrending market.

The put/call ratio was high all day, above 1.0, signaling that investors remain skeptical of this rally attempt. The AAII bull/bear survey showed 36% bulls, but 47% bears, supporting my thesis that sentiment remains tepid at best.

All of the above should support the notion of a Santa Claus rally. I think much of the year-end selling has been accomplished, and that investors will look to put money to work into year-end, possibly in anticipation of a nice January bounce.

After hours, Research In Motion (RIMM) reported solid earnings, and the stock is jumping. This should help boost the Nazz in early trading tomorrow.

Have a good night.

long RIMM

Morning Look

The market is mixed this morning, with the Nazz trading higher, and the financials dragging down the rest of the market.

Here is a quick recap of some of the headlines:
  • Bear Stearns (BSC) reports much larger than expected loss
  • MBIA (MBI) said they have $30.6 billin in CDOs
  • ORCL reported strong earnings, beating estimates by 15%
  • The FTC approved Google's acquisition of DoubleClick
  • Strong earnings reports from Nike, Herman Miller (MLHR), and Accenture (ACN)

The 10-year yield is fading again, and testing the 4.00% level. If it falls below this level, I would expect the recession talk to pick up again. Oil is trading roughly flat around $91.25. And Asian markets were mixed overnight, with China up and Taiwan down.

long GOOG

Wednesday, December 19, 2007

Midday Check

The market sold off from its morning highs after the bond insurance stocks outlook was set at 'negative'. But the market is now attempting to shake off those worries, after ABK spoke up and said they are confident in their AAA-rating.

Bearish sentiment is elevated, with the ARMS Index above 1.0, and the put/call at 1.11 also. Bond yields are falling further, with the 10-year now at 4.05% on worries of economic slowdown. And oil is rallying, above $92.

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

Financials are holding up well, with the broker index up 0.70%, trailing only the oil index on the day.

Markets Get A Boost In Early Trading

The markets staged a nice turnaround yesterday, and are following through with a bounce in early trading today. The question I am wondering is, was yesterday's bottom the low for the rest of the year? Meaning, is the market set for a Santa Claus rally now? I think so.

Morgan Stanley (MS) reported much worse earnings than expected this morning, due to a bigger writedown of bad mortgage loans. But the stock is actually higher, which is more important. The company also got a $5 billion investment from China Investment Corp, which should help its capital situation.

This news seems to be trumping the poor earnings announcements from Darden Restaurants (DRI) and homebuilder Hovnanian (HOV).

Asian markets were mixed overnight, but the ETFs are higher this morning. Oil is trading back above $90, which is helping the energy complex. And the 10-year yield is steady at 4.14%.

The VIX is falling again, back below its 50-day average. This is a good sign, but it would really be positive to see it get back below the 20 level. It is currently at 21.50. Stay tuned.

Tuesday, December 18, 2007

Investors Not Impressed With Solid Earnings

My opening post is a little late this morning, as I have been on the Goldman Sachs (GS) conference call. Let me just say that I think that this stock is being tainted by the group, and that it is not being rewarded for its relative outperformance.

Goldman beat earnings estimate for the 8th straight quarter, and was the only firm to have a profitable mortgage business in 2007. The Street continually underestimates the firm's earning power, and with the stock at $200, I would be more inclined to buy at current levels than sell.

Best Buy (BBY) also beat earnings estimates nicely, but that stock is down also. This market just doesn't have the feel of investors who are willing to step up here. But as investor angst remains elevated, this condition could change at any time.

Asian markets were mixed overnight. Oil was up this morning, which was helping the energy complex and the overall market, but it is reversing lower as I type this.

Bond yields are lower again, with the 10-year yield at 4.10%. The put/call ratio opened at 1.36 this morning, an elevated level. And the Yen and the volatility index are both lower this morning, which has usually correlated with stocks being up. So maybe the market can have a good day today. Engine room-- more steam!

long GS

Monday, December 17, 2007

Monday Morning Musings

The market is under pressure again, with lingering concerns over last week's inflation reports, the ongoing credit concerns, and a poor showing of overseas markets last night.

Asian markets fell as much as -3.5% in some countries on heavy selling pressure. But we have seen these markets bounce back all year.

There was some M&A activity over the weekend, with Ingersoll-Rand (IR) buying Trane (TT) for $10.1 billion, and Natl. Oilwell Varco (NOV) acquiring Grant Prideco (GRP) for a nice premium as well.

The financial sector is in positive territory despite the overall market being down. The mortgage insurers are getting a big bounce today, after Moody's didn't cut their ratings.

Oil is lower again, touching the $90 level, and the 10-year yield is also a touch lower at 4.20%. The market needs to hold above its November lows to avoid more serious techinical damage. I think it will, once we get more oversold. But we need some good news to spark buying interest.

Saturday, December 15, 2007

Goodbye, Poppy

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I was talking with one of my close friends yesterday and he asked me if I was speaking today. I said I didn’t know, and that for the past 2 days every time someone has asked me about my father-in-law, I got so choked up I couldn’t talk.

To which he said, look – that should tell you everything right there. Most people don’t even have that kind of relationship with their in-laws. And I’m glad he pointed that out. Although I called Steve my father-in-law, he was definitely more like a father.

Steve Chase was one of the most unique and talented men I have known. Like an artist who has the ability to look at a blank canvas and see a beautiful picture, so too could Steve look at the most decrepit room or house and envision an elegant interior design setting. He had that talent. He took both pride and pleasure in his work, and if you know what to look for, you will see his designs all over the world.

I used to think that I have a very strong work ethic, but Steve put me to shame, utter shame. No workday was too long, no hour too late – Steve was working.

And Steve was selfless man. All of his hard work and success was not for himself, he lived fairly modestly. Everything was for his family, which he placed above all else. Granted he owned beautiful houses, but that was because he designed and furnished them himself. He didn’t drive fancy new cars or buy expensive things, as he was not concerned about keeping up with the Joneses.

And Steve’s talents didn’t stop with design; he was also a gifted storyteller. Some of you are smiling right now because admittedly, Steve could sometimes be verbose. But he always captivated his listener. His attention to detail was extraordinary, such that you could envision perfectly what he was describing, and you felt like you were actually there experiencing it with him.

I hope that some of his talents are imparted on my own children. Steve lived his life on his own terms, and marched to the beat of his own drummer. In that sense, I think we could all learn something from him – I know I have.

We love you, as Taylor would say, “to the sun and back”


Friday, December 14, 2007

Market Frets Slightly Over Inflation Data

The market is slightly lower in early trading on a CPI report that showed inflation rose more than expected in November. I would be surprised if inflation continued to rise in the face of an economic slowdown, energy prices notwithstanding.

Citigroup (C) had its long-term rating downgraded by Moody's, which weighed on the financial sector. But the brokers bucked the trend, and the XBD was the first index to rebound this morning.

Asian markets were lower overnight, as is the Yen, which is a slight positive. The 10-year yield is rising on the CPI data, sitting near 4.23%. But the positive sloping yield curve is a good sign, imo.

A lot of market leading stocks are actually up today, which is a good "tell" for what may be in store for the day. Yesterday, the market was able to erase its early losses. I think the same could occur today.

I don't think people want to get too "long" ahead of the weekend, but the action is constructive, and helps to work off the recent overbought condition about which I spoke. I still think we will see further upside into year-end, once said overbought conidition is alleviated.

Thursday, December 13, 2007

Despite Fed Plan, Financials Continue To Weigh On The Market

The market is under more selling pressure in early trading, led by a decline in the financials.

The brokers are weak, even though Lehman (LEH) beat earnings expectations. But they did take some big write-downs, and were not able to say whether they are ready to call a bottom or not. So the fear of more write-downs continues.

Costco (COST) also reported earnings, and investors were not impressed. The stock gapped lower, dragging down other retail stocks, although it is trying to bounce as I write.

And Biogen (BIIB) is off nearly -30% after the company said that it has not been able find a buyer after months of exploring a potential sale.

Asian markets were down overnight after the negative reaction to the Fed's liquidity plan. But the dollar continues to trade well, and the 10-year yield is up nicely back to 4.12%. Oil is down after a sharp spike yesterday, trading below $93, and gold is also lower.

As far as investor sentiment, bearishness is spiking again, with the put/call ratio high at 1.19 and the ISEE depressed at 98; the ARMS Index is above 1.40, and the VIX is spiking +5.25% today. So let's see if the market can find some support here.

Wednesday, December 12, 2007

No Blogging Today


Due to a passing in my family, I will not be blogging today. Thanks for all of the well wishes.


Tuesday, December 11, 2007

Initial Disappointment From Fed Rate Cut

The market's initial reaction to the meager 25 basis point was very disappointing. The Dow dropped nearly 200 points in a heartbeat. Most people knew that the Fed would only cut the fed funds rate by 25 basis points, but traders hoped they would cut the discount rate (the rate banks lend to each other) by 50 basis points.

This Fed continues to display their cluelessness. They will definitely have to cut more times, so just GET IT OVER WITH now. Silly Fed.

Here is the jist of their comments:
  • The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4.25%. In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 4.75%.
  • Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks. Today's action, combined with the policy actions taken earlier, should help promote moderate growth over time.
  • Readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation.
  • In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.

Hurry Up And Wait

The market seems to be just biding its time here until the Fed meets at 2pm EST to announce its decision on interest rates. The market is pricing in a 25 basis point cut, with a 38% chance of a 50 basis point cut.

I doubt that the Fed will surprise the market with a 50 bps cut, even though they should. The Fed will almost assuredly cut 25 bps again at its next meeting, so why not just get ahead now?

As such, I expect that this overbought market will likely pull back after the announcement. Trying to time the market on a short-term basis is tricky, and usually futile. But I was surprised by yesterday's strength, which may have stolen the chances of a rally today. We shall see.

Fannie and Freddie are lower this morning, as is Washington Mutual (WM). Wamu cut its dividend to $0.15 per share from $0.56. Ouch. This has the stock trading down by nearly -9%, and is also weighing on the financial sector at large.

On the flip side, Texas Instruments (TXN) raised the low end of its guidance last night, saying that the outlook for wireless has improved. Also, AT&T announced it is raising its dividend by 12%.

Asian markets were higher across the board overnight. Oil is also higher, trading near $89.50.

Monday, December 10, 2007

Monday Morning Musings

The market is up nicely this morning, choosing to focus on the positive news rather than some of the negative headlines I have seen. A former colleague of mine used to say, "the news breaks with the cycle". Meaning, when you are in an uptrend, the market usually reacts positively to news.

The news was that mortgage insurer MBIA is getting a $1 billion infusion from Warburg Pincus. This stock had roughly 30 million shares sold short, which is why the stock opened more than +20% higher on this news.

Also, October pending home sales rose +0.6% vs. consensus that called for a drop. These news items are trumping the info. that UBS will take a $10 billion write-down on losses due to subprime lending. But they are also getting a $12 billion investment in the company from two strategic investors.

Fed funds futures are currently pricing in a 76% chance of a 25 basis point rate cut. I would not be surprised to see another 50 basis point cut in the discount rate.

The bond market appears encouraged today, as the yield on the 10-year has bounced all the way back to 4.17%. This reflects an easing of recession fears.

Asian markets were mostly lower overnight after the Chinese govt. took further steps to tighten monetary policy there.

Friday, December 07, 2007

Opening Look: Jobs Report Looks Just Right

The market is down slightly in early trading, but that is not all that suprising given the 2-day surge we just had.

The payrolls report showed an increase of 94,000 jobs (vs. 77k consensus). While this is not a very robust number, it does show that job growth is still occurring, and that lowers the odds of a near-term recession considerably.

This is a big positive, because if recession fears fade, it should bolster consumer confidence. And job growth is key. You can see the big sigh of relief in the yield on the 10-year Treasury Note. It has gapped higher today, all the way back to 4.11%, and looks to have reversed its recent downtrend.

Asian markets were mostly higher overnight, except Hong Kong which fell on profit taking. The Yen is lower again today, a good sign, as is the volatility index. And the put/call ratio opened very high, which should support stocks today.

Thursday, December 06, 2007

Market Wrap: Another Big Rally

The market enjoyed another big rally today, its first back-to-back rally days in quite some time. The catalyst for this afternoon's push higher was the housing/mortgage relief plan outlined by President Bush and Treasury Secretary Paulson (see below).

The housing sector breathed a huge sigh of relief, and the housing index (HGX) surged +8.1% on the day. That is an enourmous one-day relief rally, even as it comes of a very depressed level.

Yesterday was a classic "follow through" day if you follow the William O'Neil school of investing. What that means is that last week the market staged an initial rally attempt. And yesterday, we got a strong follow through in the form of a big up day in the market on rising volume. These follow through days have a good history of marking a new uptrend in the market.
Today, the action in the S&P 500 Index (SPX) was great from a technical standpoint. The SPX had been running into resistance near the 1480/90 level (see chart above). Yesterday, it closed right at that level.

But today, not only did it rally through that resistance (and its 200-day average), but it rallied all the way above its overhead 50-day average as well. That eats away a lot of overhead resistance, and paints a bullish pattern from which the market should continue to find support.

Also notable to this observer was the fact that the volatility index (VIX) plunged -7% on the day, and broke below its 50-day average. If the VIX continues to drift lower, it should support further rallies in the market. Ditto for the Yen, which we talk about on a daily basis now.

Remember we called this market bottom on November 20th, which was a few days early, but market a great time to add to your long exposure. The SPX is already 5% higher off those levels. I think this setup bodes well for a continued rally into year-end.

In terms of the jobs report tomorrow, the consensus is looking for +70,000 jobs. I would be taking the "over"...

Bush Housing Plan Unveiled

The highly anticipated bailout plan that Bush and Paulson are proposing was unvelied today. In a nutshell, it involves freezing the rates on mortgages that are set to jump higher for struggling homeowners in jeopardy of losing their homes.

President Bush says under new plan, people that can't afford the higher payments but can afford the current starter rates can get relief in three ways: 1) refinancing into a new private loan; 2) moving into an FHA-Secure loan; or 3) by freezing their rate for 5-years.

Here are some of the highlights from the speech today:
  • President Bush urges Congress to reform FNM and FRE
  • Paulson says mortgage industry plan is 'no perfect solution'; says plan brings 'greater value than foreclosure'; says mortgage rate freeze to 'minimize' housing slump
  • Paulson says, "says subprime relief involves 'no government money" and that this rescue plan is not a "silver bullet"
  • 1.2 mln subprime mortgages could be fast-tracked under new plan
  • Paulson says we have a healthy economy... says inflation contains a strong labor market, strong export growth fueled by outstanding growth outside of the U.S.
  • Says housing is the biggest risk to the economy... says this economy will continue to grow

Opening Look: Nice Tone Early

The market opened with a slight upside bias. Retail sales came out this morning, and were mostly a mixed back. The retail index of stocks is lower, though, mostly due to Target (TGT) giving a disappointing outlook.

The market is searching for signs of economic strength to signal that we will avoid recession. To this end, you want to see a slight uptick in the 10-year yield. Today, it is again touching the underside of 4.00%. A break above this level would signal that the recent downtrend in yields is due for a breather.

The Bank of England decided to cut its lending rate 25 basis points. This follows yesterday's rate cut by the Bank of Canada. So global central banks are beginning to increase liquidity just like the Fed. I still think we need 50 basis points next week. If the Fed knows that they will need to cut more than that eventually, just get out ahead of the curve for once.

Asian markets were up across the board again overnight, while the Yen is a bit lower again. Nice. Oil is trading back above $88, and this is helping most of the energy stocks. And GOOG is back above $700. Not that that means anything.

I would not read too much into today's action. Tomorrow's jobs report will likely move the market more, and next Tuesday's Fed meeting should be the catalyst for a bigger move.

long GOOG

Wednesday, December 05, 2007

Market Bounces On Strong Jobs Preview, Lower Yen

The market is getting a big boost in early trading, although you know I hate to see too much strength early in the session. Too often lately we have seen rallies fade by the end of the day and close near their lows. Let's hope we buck the trend today.

Last night, Fannie Mae (FNM) cut its dividend. Last week, when Freddie (FRE) did that, it took the whole market lower. But today it appears priced in. Also, positive comments out of AIG that its losses are minimal could be bolstering the financial sector.

The ADP report this morning point to a gain of 189,000 jobs in November, which is much stronger than the consensus was looking for. I guess this is good news, as it means recession is less likely. But on the flip side, a weak jobs report would have made it more likely that the Fed cuts rates by 50 bps next week. Go figure.

Asian markets rallied across the board last night. And the Yen is lower today. From my perch, the lower Yen has as much to do with it as anything you will hear today, even as it is never mentioned in the media.

Also, oil is a bit higher, touching $89 after OPEC decided not to raise output. Its seems OPEC is a little worried about the economic outlook as well, which would damper demand for oil.

I would like to see the market flatline for a while today, and then launch a late-day push higher into the close. The last thing I want to see is this rally fade into the close. If we hold, it would support my view yesterday that a 2-day pullback was in the cards, nothing more.

Tuesday, December 04, 2007

Emerson Continues To Hit New Highs

Amid all of this talk about the global slowdown, and Goldman taking down their forecasts for economic growth, someone forgot to tell the execs at Emerson (EMR).

Last week, EMR said that October orders rose 10-15% yr/yr. They noted that the global expansion in the energy sector lead to order growth of 15-20% in that segment, and +20% in the network power segment as well.

The stock continues to hit new all-time highs, even as GE languishes. EMR has excellent management, and this could be a good "tell" that the global growth story isn't about to collapse just yet.

long EMR, GS

10-Year Treasury Yield Continues To Drift Lower

The market is weak in early trading, opening in similar fashion to how it closed yesterday.

Punk Ziegel cut its ratings on the investment banks, while JP Morgan lowered their earnings estimates for the group. This is causing a decline in the broker/dealer index to the tune of -2.4% right now. I still think Goldman Sachs (GS) will report a strong quarter and rally.

DELL announced a new $10b billion stock buyback, which is a good sign. The Nasdaq 100 is down the least so far, as RIMM, GOOG, and AAPL remain in positive terrritory.

Oil is lower again today, which is weighing on the energy stocks, but should bolster consumer sentiment and aid the overall market, especially the transportation sector.

The 10-year yield is drifting lower again, which is somewhat worrisome. The bond market is sending a signal that economic growth is weakening dramatically, and the Fed better wake up. I think they should move 50 bps. next week.

If this morning's weakness can be reversed into the close, it would be a good sign. The market ran into resistance levels last Friday, so these pullbacks are not that surprising. But we want to see them contained. A 2-day pullback and then another rally could be in the cards.


Monday, December 03, 2007

Monday Morning Musings

The market is hovering near positive territory after a brief dip in the red in early trading.

Treasury Secretary Paulson spoke this morning about working with the mortgage industry to provide help to homeowners facing the loss of their homes. Despite his comments, the bank index and financials are lower so far.

Vivendi announced it is buying Activision (ATVI), sparking speculation about who will be the next video game company to be acquired. And a surprising loss by Chavez in Venezuela is helping oil move lower again, now dipping below $88. That still sounds like a high price, but it is well of the $100 mark everyone was looking for.

Asian markets were mixed overnight, and the Yen is slightly higher today. The 10-year yield is falling again, now at 3.88%. The fed fund futures are pricing in a rate cut for Dec. 11, and the odds of a 50 basis point cut are rising. This week's employment report will be big.

Investor sentiment remains cautious. The put/call ratio is back above 1.0, and the ARMS Index is elevated at 1.29. I wouldn't mind another consolidation day today before a push higher this week.