Wednesday, January 31, 2007


Market Action:
As the market was opening on Wednesday morning, the techs seemed to be suffering from some overnight earnings news that just didn’t sit right.  The NDX, NASDAQ 100, dropped about 13 points or 0.75% in the first half hour of trading; but, like so many down mornings, the market rallied out of those lows.  Within another 45 minutes the NDX was in positive territory.  

After that the market started to remember that the Fed was going to make an announcement in the afternoon so the trading range collapsed to practically zero for three hours before the Fed broke their silence.  You already know that they decided to hold rates the same again and, not only that, you and everyone else knew it days ago.  

Still, the market bolted upward after the news and didn’t look back until 30 minutes to the close when a small pullback occurred but the Dow managed nearly a 100 point gain for the day and the other indexes were strong.  We found the final Dow number to be rather silly because the traders didn’t manage to make a new high by eight cents.  Yes, the Dow traded in new high territory but they just couldn’t manage a new closing high, ditto the SP 500.

After the market closed, we had two news items, one from GOOG and the other from DELL.  The GOOG news was first, seemingly good earnings news, and caused that stock to drop about 3%.  Huh?  DELL’s news was that CEO Rollins was out and Michael Dell was back in as CEO, remaining on as Chairman of the Board.  Well, that was the news that DELL wanted the market to hear anyway because they also announced that they expect to miss revenue and earnings numbers for this quarter.  The market jumped on the stock as this change at the top has been anticipated for some time as DELL has been losing its luster (mostly to HPQ).

So, the after hours market got tanked after GOOG’s news but managed to recover all of it after DELL’s news.  Such is the market these days.

Fed Announcement:
The Fed declined to make a move on rates on Wednesday just as we and most analysts have said for the past few weeks.  We’re not sure any more needs to be said here?  Well, maybe one thing, the bonds have seemed to be expecting a modest increase in rates but when one didn’t come they managed a rather spirited rally.

We wanted to be able to tell you that the market is now finished moving up but we still have another trading day until we get the jobs’ report.  With the action pushing up the Dow and SP 500 to new highs (during the trading day), we are again wondering how much more these indexes can move up, especially in the face of waning momentum.  

At the same time the NDX, our favorite index, seems to have put in a high back in the middle of January at 1844.81 which compares to the close of 1792.28 on Wednesday.  The small difference indicates that the Dow and the NDX are probably not in sync right now as the NDX seems to be lagging the Dow.  At this time the NDX looks like it has topped while the Dow could move a little higher without the NDX.  

If the NDX does manage to move up here in the next day or two, we want to take advantage of the opportunity.  We usually look to the jobs’ report as a good time to sell into strength and we fell that this Friday will be a very good time.  All of the pieces seem to be falling into place except for the Dow moving higher which tells us one major thing:  The headliner Dow will stay up a little while longer to keep the general public in the market.

Dow Industrials:  12,621.69  +98.38
VIX: 10.42
HUI:  336.01
QQQQ:  44.07
RYVNX:   16.65
RYAIX:  21.23
RYCWX:  34.76
TLT:  87.55
BEGBX:  13.56

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