Last Thursday we stayed away from the market and it was a very good decision – even though signs were that we were going to get our “Santa Claus rally.”
We saved ourselves a lot of pain on Thursday and Friday and we picked a lot of winners on Tuesday but I am very concerned that that was the rally we had been waiting for.
The Nasdaq, S&P and Dow all bounced off resistance yesterday while oil bounced the other way, up from $63. A drop in inventories today can really lead to a market meltdown so, in the very least, let’s wait until 11 (1/2 hour after inventory) to see where things are heading.
Today should be the day that the big boys get back to work after a couple of days of meetings to decide where everything is going (this is why you are hearing so many analyst calls this week).
I would consider any kind of positive market finish today to be a very bullish sign.
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WLS was the first home builder to disappoint yesterday with a 7% drop in orders. A bigger sign of a problem was cancellations rising to 31% from 29% last year.
Hombuilders on shaky ground include LEN, BZH and KBH but all are generally very good companies and are very dangerous to short. Use WLS, TOL and HOV as an indicator of the overall market.
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CSC will rocket close to $60 as word is out that HPQ will be making an ridiculous offer of $12Bn. I don’t see this as being a very good idea for HPQ and be warned that last time there was a rumor on this stock, it was very short lived and dropped right back to $50.
BOOM continues to rocket since our early December pick, now I am sure it was just consolidating for a move up.
ATI should have a good year, watch for TIE as a leading indicator.
If natural gas prices stay under $10 today, DOW should do very well. The company is not getting the respect it deserves for incredible earnings growth of 50% on 15% more sales, even in light of record raw material costs. This is a company that will make more money this year than it has in the previous 3 combined trading flat to January ’04!
SBUX is up just $1 from where it was recommended on 11/21 but, interestingly, the Jan ’08 $30s we picked are up 25% to $7.50 so I would say sentiment is very bullish on this stock.
WMT announced an earnings disappointment (low end of guidance) – this can really hurt the markets right off the bat…
Still in cash with no Trade of the Day – markets are way too choppy atm.
Good Trading,
– Phil
