Monday, February 19, 2007

Short Week Ahead

Market Action:
In our last post which was Thursday evening, ancient history, MSFT had just dropped a little stinker on the market.  That news was that MSFT, CEO Steve Ballmer, had mentioned that maybe the analyst’s expectations for VISTA were too high given projected PC growth rates.  

That news served to drag MSFT down some in overnight trading and that mild weakness carried into early trading on Friday.  As we have mentioned in the past, bad news on one company is mostly company specific but good news on a company is deemed to be globally significant.  So, the NDX, the NASDAQ 100 and our favorite index, started a little down in the morning but managed to get close to even by the end of the day.  As for MSFT, it didn’t fair nearly as well, trading in a narrow range after the early hit.

One noteworthy news item hit the market on Friday and that was the January housing starts.  That number was considerably bad down 14.3% after expectations were for only a 2.6% lower number.  The market didn’t really budge, that would be both the stock and bond market, after that news but we thought we should mention it due to our stance on the housing market.  The PPI didn’t do much for the market either with it matching expectations.

Last week we concentrated mostly on the stock market and we think we will start to share the stage somewhat with other areas this week.  We will see how the week shapes up.  Importantly, the stock market is in the late stages of this countertrend rally we have been in since last summer.  We are trying to position ourselves for a stock market drop that should take us down quite a ways by October.  

As we said above, the news is generally not bullish but the market continues to ignore what is going on in the real world.  The market marches to a different drummer anyway and that is the supposed liquidity that is being assumed in the market.  We think that the housing slowdown will have its way on liquidity.  Housing is an important economic driver and it seems to be continuing to slow down, or maybe going in reverse.

Upcoming News Events for the Week (light week):
Earnings reports for HD, WMT, HPQ—Tuesday
January CPI--Wednesday
January leading economic indicators—Wednesday
January FOMC minutes—Wednesday
Earnings report for TOL—Thursday

Trading Note:
We have been following the VIX for possible entry into the call options the past few days.  When we tried to execute a trade on Friday, we couldn’t get a trade off due to some technical difficulties.  We plan to take another look to see if there may be a better time to do this or whether this is the right option to buy.  If the market is headed down into October we may want to get into a longer dated option.

Dow Industrials:  12,767.57  +2.56  (record high)
VIX: 10.02
VIXEC.X:  1.30 x 1.35
HUI:  347.09
QQQQ:  44.71
RYVNX:   16.18
RYAIX:  20.95
RYCWX:  34.07
TLT:  88.64
BEGBX:  13.70

1 comment:

Anonymous said...

I'm guessng you had very little difficulty in getting those calls at the price you wanted.