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December 07, 2005
A Gap and a Shooting Star, Inflation Easying and Gold Surging, Pepsi Closing in on Coke, Will Google and Apple Surpass Microsoft?
Good day! Despite an afternoon sell-off, most stocks and indices finished on the plus side and the gaps are largely holding. The 1-Dec gap remains the most important gap. 15-day RSI on the QQQQ chart formed a small negative divergence over the last two weeks and this shows less momentum. In addition, the shooting star reflects a failed rally and this reinforces resistance around 42. However, I will return to the gap and long white candlestick for the final say. The bulls have the edge as long as these hold.
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From Dow Jones: U.S. economic growth and inflation will moderate in 2006, but so will the unemployment rate, according to a group of business leaders, academics and others gathering at a recent Chicago Federal Reserve symposium, the bank said Monday.
Somebody forgot to tell gold about moderating inflation. The StreetTracks Gold ETF (GLD) surged above 50 last week and above the upper channel trendline this week. The trend is clearly up, but getting overbought as RSI crosses 70 for the third time in the last few weeks (gray oval). As long as RSI holds its late November low, momentum is with the bulls. A move below 63 would open the door to a correction that could see GLD pull back to 48-49.
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From the Wall Street Journal: If things don't change, Coke CEO Neville Isdell could be remembered for being in charge when the King of Pop lost its throne. Pepsi is within striking distance in stock-market capitalization for the first time since Coke shares hit the market in 1919.
From the price chart, you can see that Coke’s market cap is roughly 1/2 what is was in 1998 and Pepsi’s market cap is almost double what it was in 1998. This comparison got me to thinking. In five years we may be able to swap Google for Pepsi and Microsoft for Coke. Or, perhaps even Apple (AAPL) will surpass Microsoft in five years. The Coke analogy goes to show that if you loose the young up and coming, you loose - period. Apple is clearly winning the hearts, minds and wallets of the hip.
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Posted by Arthur B. Hill at December 7, 2005 06:48 AM