As we write tonight, there really is only one story that matters, GOOG. There were other earnings related movements on Thursday, such as C (Citigroup) and DELL (losing market share to HPQ, Hewlett Packard) but these stories pale in comparison to GOOG. The stock trended up for most of the day and then powered up after reporting strong earnings. During the day, GOOG was up almost 7 points to 426 but after the announcement, GOOG moved up 32 more points to close at 458 in after hours trading.
You thought we were going to say the only story that matters is the Dow crossing and finally closing above 12,000. Well, the media seems to think this is a big deal but as you know, we think the Dow moving to new highs all by itself is more bearish than anything. With the Dow above 12,000, there is a sense of power in the bulls, not just optimism. The way GOOG traded in the after hours gives you a sense of just how speculative this move is. No one fears for any reason.
This seems to run against the people who have lost money in many of the stocks that have taken hard hits just this past week due to earnings, not to mention the downdraft that affected many stocks from early May to late July. Some of those stocks have not recovered. Most people are looking at their mutual funds balance and asking “Where is the new high in my fund?”
Friday is options expiration for October and, given the movement in the after hours market, Friday could be a wild day. These are the type of days when traders can either lose or make a lot of money. We generally like the scenario of up mornings leading to exhaustion and lower prices later in the day. Right now there doesn’t seem to be one reason to sell stocks but we are recommending just that. The whole concept is to Sell High, remember?
The lone item of news that didn’t seem to do anything for the market was the LEI, leading economic indicators. Expectations were for a 0.3% increase but they came in up only 0.1%. The coincident indicators were flat.
Confidence is running fairly strong right now on the back of the Dow’s 12,000 but we recommend caution in these carefree days. To us, it’s like climbing a mountain. Once you get to the top, you take a little rest and look around and then you come down. It’s only a matter of time.
Dow Industrials: 12,011.73 +19.05