Thursday, February 01, 2007

DELL Ends Down on the Day

Market Action:
Continuing from yesterday’s post…The big story on Thursday had to be DELL.  Here we have the stock being pushed higher over night and early on Thursday morning all because the CEO resigned and Michael Dell is back in that job.  Our first thought is “Are all of these traders crazy?” and then we start to get more to the point on our second thought:  “Hasn’t Michael Dell been there the whole time and hasn’t he been overseeing the entire operation anyway?  How could the CEO leaving do anything positive to the future of DELL?”  

As the market opened DELL was up about 5% which happened to be the high of the trading day.  DELL pretty much went down all day and closed on the lows of the session.  

On to the other stock from yesterday’s post:  GOOG had about the same trading pattern as DELL but with a slightly different starting point.  As we noted in our last post, the market didn’t take to kindly to GOOG’s earnings report.  Rather than open up 5% as DELL did or open down about 3% as the overnight trading had finished, GOOG opened about flat and leaked all day closing down about 4%.

These two stocks are probably responsible for the NDX’s poor performance in the face of a new record high in the Dow.  The NDX actually ended down on the day.  The only other major index that was down on the day happened to be oil services.  

[In related news this evening, we note that the WSJ is reporting tonight (and probably in Friday’s paper edition) that DELL is being accused of improper accounting in some of its dealings with INTC.  In a case that is seeking class action status for DELL shareholders, there are accusations of taking, possibly illegal, kickbacks from INTC.  If you remember, DELL was exclusively an INTC Inside brand much to the exclusion of AMD.  Read the story for yourself but this is not good news and could be some of the same things the SEC is finding.]  

One piece of news that should have moved the market and didn’t was the January ISM manufacturing report.  This report indicates weakness below 50 and the number was below 50 at 49.3 when expectations were for an increase to 52.0 from last month’s 51.4.  A 49.3 indicates contraction and since that number hasn’t been below 50 for nearly four years the market should have been a little concerned.  Any negative reaction was very short lived.

After the market closed, we heard from AMZN that earnings were not really as good as the street was looking for.  At the first announcement AMZN was up $2 or about 5% but by the end of after hours trading it was only up 20 cents, but it was up for some reason.

Friday’s Jobs’ Report:
CNN posted a headline in the afternoon that the bean counters had found some 1 million jobs that had fallen through the cracks over the past few years.  Ok, let’s get serious here.  The jobs for a month are right around 100K every month and now the government is going to tell us that hey sorry we forgot to count some jobs and by the way the number we missed is around a million over the course of about 18 months.

We have seen modest jobs increases with what is know as the birth death model which we don’t honestly understand what on earth they are talking about.  So, when the jobs are reported on Friday morning, there will be a sub-heading that indicates that they forgot to include these additional jobs.  What we understand is that these additions serve to increase the denominator of the unemployment number so we could see a decrease in that number on Friday.  The number of jobs expected still remains around 150K and that is the number the market will focus on.  

The month end rally we have been waiting for seems to have materialized, in the Dow and the SP 500 at least.  These two indexes exceeded their January highs and in the Dow’s case that means we have a new all time record high in that index.

Our indicators are now at overbought status and we believe the NASDAQ indexes have actually seen their tops in this cycle.  With the Dow moving up, there are plenty of people with glazed looks watching and hoping for higher prices.  In the Dow that may be possible for another few points, maybe a couple hundred or so but this is the time to be looking at your mutual funds for possible changes.  With this Dow all time high, how are your mutual funds stacking up?


Dow Industrials:  12,673.68  +51.99
VIX: 10.31
HUI:  339.11
QQQQ:  44.02
RYVNX:   16.67
RYAIX:  21.24
RYCWX:  34.47
TLT:  87.09
BEGBX:  13.56

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