Wednesday, February 22, 2006

INTC Left Out of Rally

In market related news, the CPI (Consumer Price Index) jumped 0.7% for January but, of course, the Core rate only rose 0.2%, so not to worry.  We only report this number because there seems to be some interest in what the Fed wants to do about interest rates.  When the Core rate is Only 0.2% the market can believe that the Fed is almost done.  We don’t want to be looking at the actual rate of inflation because that wouldn’t support the position (yes, the sarcasm is back).

For its part, the market popped pretty hard Wednesday as many stocks took off from yesterday’s down beat day.  So, for two days the market is about net nothing, Tuesday was down about a percent and Wednesday was up about the same.  We note that the Dow is making new relative highs and trying its level best to pull the rest of the market up with it.  We see this action as a bad sign, well, let’s just say, not good for long term bulls.

Even the bond market was up today on the CPI data.  Everyone must be thinking that the Fed has managed to hold the rate of inflation down with its recent rate hikes.  We don’t see it that way due to the fact that the bond market has barely budged during the same period that the Fed has raised rates nearly 4%.  We don’t  see the change in mortgage rates as being much more than just noise, up or down about a quarter of a percent in the last couple of years.  

Today’s news for the Wednesday Update is that the little company we have been following for several years, INTC, got hit by an analyst downgrade and fell a couple of percent in this strong market.  The analyst said the target price for INTC is 16.  We would agree with the assessment if he said 6 to 10 but at least he’s got the direction correct.  

There is much uncertainty in the market right now, even though the Dow has gone up to new relative highs.  The broader market is not participating and this should be heeded by the traders and Us.  Be careful out there.  We are going to be looking for a good point to sell into coming up very soon.  The market is now over bought and, of the major indexes, the Dow is the only one pressing to new highs.  The market is close to rolling over hard.  We are trying to be patient.

Dow Industrials:  11,137.17  +68.11
RYVNX:  18.72
RYAIX:  22.02
TLT:  91.42
BEGBX:  13.06

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