Thursday, November 16, 2006

Another Day Another Record Dow

On Thursday morning, we found out that the CPI was almost a distant memory being down another half a percent matching the last month’s decline. The media has now started to focus on the full CPI because it is now showing better decreases than the “core” CPI and that is more appealing to the public. With that in mind before the market opened, stocks were sought after and so were bonds. The bonds didn’t hold their gains but the stock market ground higher all day. As an added benefit oil was down over $2.

Ten days ago the NDX traded below 1700 and Thursday it closed above 1800. That’s a pretty good run for a tired bull, about 5%. One of these days the market will need to slow its upward pace. Friday is options expiration and with it we hope there will be some natural slowing in the bullishness.

Afte the market closed, HPQ (Hewlett Packard) showed some strong earnings. This is in sharp contrast to DELL's announcement on Wednesday evening when it said it would delay its earnings announcement until later in the month. Still, the overnight market is not celebrating the HPQ news. We will see how options expiration Friday trades.

There is an article out on CNN Money (check the link to that site at the left) that mentions the “fear gauge” or the VIX as we talk about it here at the Update. The article says that it’s at one of its lowest points in a decade but of course goes on to explain that this is not a problem. We see complacency as a large problem but so far this month, or since late July, the bulls have been cleaning up and we have been gasping for breathe.

We still have some dry powder and we have had much of our assets in bonds or cash equivalents and have been earning a fairly decent 5% return or so on it. We are anxious to cash that in and go short with at least some of it but we are going to wait until the market decides it wants to go down.

We do think that it’s at these times that those of you who own blue chip type stocks, this is represents a good time to sell, again. We just know that you probably think there is no reason to sell since they are just going up every day, but here’s what happens: You will watch them go up and then you will watch them go down and you will say I can’t sell now, they have come down too far. If they go back up again I’ll then sell and they never do.

As we survey the technical landscape, we still see volume lighter than it should be, an overbought momentum indicator, relatively weak price moves on the way up, just to mention a few.

Just, please be careful. That’s the best we can say this evening. Have a good weekend.

Dow Industrials: 12,305.82 +54.11
VIX: 10.16 (new 52 week low)
QQQQ: 44.30 (new 52 week high)
RYVNX: 16.79
RYAIX: 21.35
RYCWX: 36.06
TLT: 89.44
BEGBX: 13.81

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