Modest Down Day

Buyers immediately came in on Wednesday morning and lifted prices after the market opened significantly lower, such that the Dow was nearly unchanged an hour into the session.  The other indexes were not quite that strong but they did start out lower.  Curiously, the one index that did manage to close positive was the Philadelphia Semiconductor Index, the SOX as we know it.  This index has INTC in it and INTC was down over 10% today so I guess the hit it took was stock specific.  When the market rallied in the first hour, the SOX was the leader but it didn’t get any help from INTC all day.  So, there you go, the SOX leads the bullish charge but leaves INTC on the side of the road to die.  

The news from the Fed’s beige book was greeted with some buying in the afternoon too but for the most part the market went out about the way it came in, down a bit.  The media was full of bullish articles recommending people not panic or my personal favorite from CNN.Money about the Chicken Little’s being wrong and world is not coming to an end and that the market is 10% undervalued right now.

We consider all bullishness to be the result of the early January rally that took the Dow over the big 11K hurdle.  The fact of the matter is that the market is Overbought and is due for at least a correction.  As of the close today the Dow is down about 200 points from the highs set last week.  Today, the market showed signs of rolling over from its overbought position finally.  

The important thing to remember is that analysts, including me, do not really know what the market is going to do this year.  I like to think we bring some unbiased (although predominantly bearish) opinion but…  

Based on the Barron’s Roundtable discussion I mentioned yesterday there are people in both camps.  One of my favorite sections in the article was that someone said they thought that the market was going to go up about 15% this year and another one said that he was in the 10% to 20% camp too but on the downside.  Both of these people cannot be right but they are looking at the same market.  

We warn you to protect yourself from generalized thinking and concentrate on your stocks.  Well, we do generally think you should sell but there are some sectors that may outperform, I just don’t think it’s that easy to find out which those are.  Our focus is on the technology, financial and precious metals.  None of these look like value buys at this time.  

After the close, AMD, Advanced Micro Devices, had some good news and the stock popped about 10%.  AMD is INTC’s primary competitor; let’s see, INTC is down 10% and AMD is up 10% but in the same industry and basically on the same day.  We have been watching this pair for a while.  Back in October AMD was trading around 20 and tonight in the after hours trading, it closed at 37.80 according to one source.  INTC, on the other hand, traded down under 22 in the fall and rallied to just over 27 in the first week of the year only to close tonight at 22.51 in after hours.  

In other earnings news, AAPL (Apple Computer) announced earnings after the close that didn’t satisfy and it suffered a drop of about 7% right after the news but managed to trim those losses before the close of after hours trading so that it only sported a 3% loss.  EBAY announced stunning results but 2006 forecasts were less than hoped for by the owners and they sold EBAY off a little in after hours.

Japan turned around last night and tonight is trading up.  There has been some volatility there this week, wow.  

Thursday we are going to be looking to see what the December new housing starts number is.  This number could be a market mover but even if it isn’t, we are going to be interested in the number.  Real estate will be the key to the stock market and the economy this year.  Be careful…

Dow Industrials:  10,854.86  -41.46  (not much decline here)
RYVNX:  17.84
RYAIX:  21.44
TLT:  92.57  (couldn’t hold the early strength)
BEGBX:  13.37