Wednesday, February 08, 2006

CSCO Saves the Day

CSCO did indeed bring some life back for the stock market bulls with a little help from our ex-Federal Reserve Chairman Greenspan.  What he said did not really match up with the market’s recent mode of operation, that being, trading up on the Fed Not being able to continue their interest rate march higher.  Mr. Greenspan said the economy was stronger than most think and therefore the Fed has some unfinished business.  So, at least for Wednesday, the market is “having its cake and eating it too” since the market can now go up on good economic news that might force rates higher or it can go up based on a weak economy that would allow the Fed to slow its rate hikes down.  If you can follow all that, then maybe you could actually understand what the ex-chairman was saying, too.

Yes, the market had a good day today but we still think that is didn’t have that great of a day.  We have said many times that the market can play around all it wants to between areas of support and resistance but it only matters if those levels can be broken.  We remain bearish.  The Dow could try to eek out a few more points but it doesn’t really matter.  We only care about it breaking above the January highs, over 11K.  Then we might have to take a better look.

Wednesday is a historic day for the bond market as the US Treasury is bringing back the 30 year bond, something that hasn’t been around for about 10 years, Clinton’s era.  Back then, Clinton suggested that the government was spending too much money on interest by selling those long bonds with higher yields, so he suggested that the country abandon the long bond in favor of the ten year bond.  This was a good idea at the time but now long rates are at about the same level as the ten year so it seems like a good idea to bring them back.  To celebrate, the Treasury is bringing about $14 billion worth to market.  There is some expectation that the sale will go well.  From this desk, I don’t really understand how someone can invest in 30 year bonds in this environment, especially when you hardly get anything for going out that far, except more risk.  Good luck to all of you out there buying them.

Dow Industrials:  10,858.62  +108.86
RYVNX:  18.85
RYAIX:  22.07
TLT: 90.39
BEGBX:  13.03

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