Tuesday, April 22, 2008

Drugs Anyone?

Top Line: These are the days that are designed to confuse. With the market struggling to go up in here, days like today make the bearish case look better. We still think there is room on the upside.

You may recall the magic number 12,750 from several of our past posts. The Dow level of 12,750 seems important to the market because it has traded there several times in the past few months. Today, Tuesday, the Dow dropped below that level again and closed just under it at 12,720. What are the implications?

Our interpretation has been clouded over the past few days because we have seen a move that took the Dow up to just under 13,000 which is exactly the level we would like to see as the top of this move. Does that mean the Dow is done going up? That's the question we have to ask ourselves and on a day like today where the Dow drops below the key 12,750 level After trading near our target of 13,000...we think the probability is rising that the top is in for this move. We would like to see a move back up to that 12,900 level and then a failure to be sure but we can't always have what we want...does anyone hear Mick Jagger singing...but you get what you need.

The stock market should give us more clues that it has finished going up. With days like Tuesday, bears get some traction and that makes us think there is more room on the upside. You do remember that we are extreme contrarians, don't you?

The news is dismal but the market struggles higher. That defines the countertrend rally we happen to be in at the moment. The market is trying to shrug off the obvious and look over the Canyon to the upside on the other side. We want to give it ample room to go up. Anticipating the next down move too early may give us large bruises in our portfolio, like normal.

One odd item for your consideration: Fleck has made some comments on the drug companies and we solicit your comments, especially the readers from Evansville--especially on BMY, Bristol Myers Squibb. BMY has nearly a 6% dividend--any thoughts? The other ones are Eli Lilly (LLY at about 4%) and Pfizer (PFE at about 6%). These should be pretty good names especially with the baby boomers needing their drugs over the next couple of decades...

FSI: 88.96 (GOOG was up again and carried all three other stocks which were down)

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