Wednesday, November 15, 2006

DELL Delays Earnings

Wednesday’s trading was pretty much a follow up to Tuesday’s rally just a little more subdued. The only fly in the ointment on Wednesday was the Fed’s minutes which indicated that the economy could still be plagued by inflation. They are watching the weak housing market to see if it slows economic growth. With that news the market slowed down its advance and pulled back slightly into the close.

Then after the market closed, DELL announced that it was going to delay its earnings report until nearer the end of the month. The original date was supposed to be Thursday (today for you). Although DELL did say that the SEC stepped up an investigation into the company’s accounting, DELL said that wasn’t the reason for the delay in reporting. DELL announced that it wouldn’t be having a conference call on earnings either. So, what’s an investor to do? Well, in after hours the stock was hit for 3 Whole %. Wow, what a blow!!! In an uncertain world, DELL should be down 30% on this kind of news.

The market seems to be powering through any and all bad news. We expect that the reason is that temporarily the feeling can be that the Fed won’t have to raise rates. (Maybe last week’s election is playing into the thought process, too, although we don’t really know why.) That Fed thing is getting to be a tired reason for a rally but that is in a nutshell what we think the market is doing. When the realities of the economy start showing up at home, the stock market should have dropped. Can you follow the tense there?

What we mean is that the market seems so blind to the future according to our view. We think the market should be looking into the future to see what is going on. This current rally is certainly not lining up with our vision for the future so there are a couple of things: First, the market is definitely smarter than we are, which normally is true. In the current arena, we just don’t think so. Second, we could be right and the market is wrong, which if that is the case a day of reckoning is coming. Of course, that is our current position. Every day we have another little rally, the pain is still there.

The latest read on our momentum indicators based on Wednesday’s trading is that the market is again overbought and has not been oversold for nearly four months. That’s a long time and we don’t think it can keep this up much longer.

Dow Industrials: 12,251.71 +33.70
VIX: 10.31
QQQQ: 44.11
RYVNX: 16.94
RYAIX: 21.44
RYCWX: 36.37
TLT: 89.85
BEGBX: 13.84

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