Monday, January 14, 2008

IBM Saves the Day

Top Line: In line with our thinking, the market did move up on Monday. While the news was IBM, the market was ready for a bit of a rally. Our current target for the Dow is still that range between 13,000 and 13,200. Until we get there, the rally remains the best direction for stocks. After that, and this is the reason we are not going to play the up move, there should be a good selloff that takes the Dow down quite a ways. How far? Well, if the August lows finally get taken out, there really isn't much support until we get down to 11,000. In down markets, support levels are no match for sellers.

As we mentioned, IBM took the spotlight on Monday with some relatively good earnings news. Good news from companies of almost any kind is in short supply so this little notion of a positive quarter was taken as the message buyers were waiting for. The tech world did manage a pretty healthy move on the back of the IBM news.

In the secondary spotlight continues to be the Fed. As you already know, they don't like to be in the second spot. The market would like to have a nice, big rate cut and they would like to have it Now, please. The problem is that the market should really wait for the cut rather than rally prior to the cut. If the market goes up, the Fed may not need to lower rates. Well, that may not be true because they just enjoy lowering rates so much. We'll just assume that the Fed is going to lower rates 50 bps right now. That's not what the market wants, it wants 75 or 100 bps.

Tonight's news is from C (Citigroup). The news is that the company is supposed to be laying off over 20,000 and slashing its dividend. This news is pushing the Asian markets down now and the US futures as well. Somehow, we figure the market will find some way to make this some bullish news and we'll find out on Tuesday, or Wednesday.

FSI: 98.26

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