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November 07, 2005
Market Musings
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Dan Luskin of SmartMoney.com (click here) reports that volatility is dropping and his technical indicators suggest higher prices. Dan also like the political landscape, but I really find it hard to use politics to time the market.
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Barron’s (click here) leads off with 15 companies that are cash rich. These include: CMVT, NOVL, ASH, SLR, SNDK, LXK and KLAC.
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Barron’s (click here) also reports that "SonoSite (SONO) has built a better mousetrap -- a state-of-the-art, hand-held ultrasound diagnostic system. Investors will be beating a path to its door". Perhaps more importantly, the stock shrugged off a bad earnings report and bounced on big volume the last six days.
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Friday's employment report came up short on job growth. This is a problem for jobs, but not always a problem for stocks as long as profits can grow with fewer workers (i.e. productivity increases).
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BCA Research (click here) advises that the decline in bonds is nearing its end and an economic slow down is coming. Slower growth would put a bid back in bonds.
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Coca-Cola will stop producing vanilla coke and focus on cherry and lime. I thought vanilla coke was pretty good. But then again, I like a shot of vanilla in my latte as well. KO is missing the point here. Coke in general is on the way out and the company needs to come up with something completely new. It is hard to teach and old dog new tricks and Pepsi has captured the teen market.
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Bill Fleckenstein's Contrarian Chronicles (MSN Money) (click here) insinuates that Mercury Computer (MERQE) got a boost from its biggest shareholders at the end of October. Bill calls is tape painting and it is done to make end of month returns look better. Maybe it was just an oversold bounce as shorts covered or took profits ahead of earnings. In any case, the stock gapped lower on the first day of November and this wiped out any tape painting efforts. You can fool some people some of the time (short-term trend), but you can fool all the people all the time (long-term trend)
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William Gabrielski of TheStreet.com (click here) reports that Calpine's math adds up to a sell. CPN is trading around 2 and priced for failure. Looks like it has already been sold. This should at least serve as a warning to bottom pickers.
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Dan Fitzpatrick of RealMoney.com(click here) thinks the Nasdaq can break 2200 and move to multi-year highs. Thursday's gap better hold.
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John Spence of CBS MarketWatch(click here) reports that a silver group is against the creation of a silver ETF because it "would create a price squeeze in the metal because the fund would have to buy a large amount of silver to back the fund's shares prior to the launch". If this is the case, it would be prudent to let this new ETF settle before looking to buy into it.
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Pirate attack!? Yes, it is true. A Carnival (CCL) cruise ship came under attack by pirates off the coast of Somalia. The ship managed to outrun the pirates and there was no harm. Steer clear of the Somali coast.
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The US Dollar Index broke resistance at 91 and this could put pressure on commodities like oil and gold. Gold has been immune to strength in the US Dollar Index lately, but that could be changing as the StreetTracks Gold ETF (GLD) declined sharply last week.
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The Dow Industrials entered a resistance zone and turned indecisive on Friday.
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The Dow Utilities failed to partake in the rally over the last three weeks and formed a consolidation. Watch 405 up and 385 down.
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The Nasdaq gapped up and held the gap. Thursday's gap holds the short-term key for the bulls and it better hold.
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The NYSE Composite closed above its 50-day SMA on Thursday. Let's see if it can hold.
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The Russell 2000 ($RUT) moved into a resistance zone and formed two indecisive candlesticks over the last two days.
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The Energy SPDR (XLE) formed a rising wedge that retraced 62% of the prior decline and met resistance just below the October support break. Watch support at 48 for a bear signal.
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The Finance SPDR (XLF) formed a harami over the last two days and the market leader is getting weary.
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The Internet Architecture HOLDRS (IAH) gapped up on Thursday and a break above 35.6 resistance would be bullish. Without follow through, the consolidation holds and IAH is neutral at best.
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Posted by Arthur B. Hill at November 7, 2005 10:22 AM