Tuesday, February 28, 2006

GOOG Droops on Fat Tuesday

The news this morning was decidedly shrugged off by the market; you know, little things like the Giant GDP revision to up 1.6% from 1.1%, the Conference Board Consumer Confidence Index dropping to 101.7 from 106.8 with expectations of 104.6, or the Chicago Purchasing Managers Index falling from 58.5 to 54.9 when estimates were for an unchanged number.  

You might have thought we had forgotten about the existing home sales, but we haven’t.  We may have mentioned in the last post that the estimate was for a rise of 1.5%, don’t you know that the weather in January was extraordinarily warm and interest rates were still in a fairly nice home buying range.  But still the existing home sales dropped 2.8% very much in line with our thinking.  The market shrugged off all of this negative news…  

But then, the CFO of GOOG made some statements the market perceived to be negative and GOOG dropped about 50 points in about 5 minutes and dragged the entire market down with it.  Of course, GOOG was debated all day about whether it now should be  bought or sold and by the end of the day was only down about 27 while the broader market ended lower.

As bears, we would say that the market was ready to be sold or it wouldn’t have gone down.  This trading day makes the strong week of the month look a little tepid.  We anxiously await the follow through on Wednesday.  Our position is that the market is overbought and needs to have a firm selloff.  We believe that the market peaked in early January and has now been in the midst of telling us, with all of the non-confirmations, that the market wants to go down.  We cannot emphasize this enough.  Tuesday’s market was just another little message and we should heed it.  

We are getting more confidence daily that the market is rolling over.  You should be checking your stocks to see what they have been doing in this past two months.  If they are not performing better than the market then you need to consider selling them very soon.  Let me know via the comment section with any questions you may have.

Be careful out there…

Dow Industrials:  10,993.41  -104.14  (below 11k again)
RYVNX:  18.89
RYAIX:  22.12
TLT:  91.35
BEGBX:  13.11

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