Thursday, November 17, 2005

Just Another New High in NASDAQ Comp

The NASDAQ Comp put in a new high for the year and for several years on Thursday.  I concur with Erick’s comments yesterday.  The market really hasn’t done that much this year and the new high today has now brought the NASDAQ Comp to 2.5% gain for the year.  Being in cash for the year would have netted you 4% probably.  This is very exciting and all but the move is only a short term move.  

The market is not a very good place to have your money due to the lack of a definitive move.  We have been short from the first of October and thought we had picked the best place to do that but the action since the middle of October has negated all of it.

The new high in the Comp comes at a time when the participants seem very bullish so I’m confused as to why the market is accommodating the bulls.  We have obviously been on the wrong side of this move since October and don’t like it.  Every day I think the market has had enough upside and then some more money comes in to keep it going up a little.  

The fact that the Comp hit a new high for the year should be bullish but the momentum indicators just do not confirm this.  Even the volume was not confirming the up move on Thursday.  Yes, upside volume was strong but it wasn’t blow out strong.  If the market can’t mount a decent burst in the morning, we would say that today’s rally was a good time to unload some stocks.  

Writing a stock market post is a difficult thing due to the tremendous urge to follow your emotions.  We constantly talk about selling relative strength and buying relative weakness.  So, we will talk about it again.  This move is just about over and only needs a little push to send the market going in the opposite direction.  Just because it has gone up does not mean it will continue.  If you have missed the move from the lows of October, then you probably don’t have much left on this move and you shouldn’t now try to get in.  

I bring this October low up just because back then there was some fear and nobody really felt confident that prices were going to go back up ever.  Today, there is great confidence that the market can’t really go down before the end of the year… You make the call, because you always do anyway.  I’m just here to provide a little contrary thinking.

In the news, HPQ reported a 62% drop in profit but raised its forecast for this quarter.  Revenues were up but the company said it had one time charges that brought earnings down.  Hewlett Packard was up in after hours trading.

GOOG managed to push over $400 on Thursday in what can only be described as speculative trading.  The stock has now surpassed Coca-Cola, CSCO, and Time Warner in market value and sits on a 90 PE ratio.  Yes, its forward PE ratio is near 50 but that is yet to be seen and carries only a little weight with us.  Congrats to those who bought this stock at the beginning of the year near $200.  I feel sorry for those that have paid $400.  The believers in this stock are now pushing up their price targets.  Does anyone remember the 1999 to 2000 market?

The GAP experienced a gap in earnings as they fell 20%.  Disney saw its net drop 27%.  But, the big news as we read it is Housing starts which dropped about 6%.

The housing juggernaut is still mighty big but the air is starting to come out of the market.  Whether due to the high prices, higher heating costs, higher interest rates or just the economy, we are starting to see various signs of weakness.  This should lead to a downturn in the stock market as well.  We remain bearish tonight, oh really.

Dow Industrials:  10,720.22  +45.46
RYVNX:  18.89
TLT: 90.56  (one bright spot)
BGEIX:  13.61  (new high for the year here)

No comments: