Börsipäev 14. veebruar

14.02.2005 15:57

Rev Shark:

Save the Love for Valentine's Day
2/14/05 7:54 AM ET

"Of all forms of caution, caution in love is perhaps the most fatal to true happiness."

-- Bertrand Russell

On Valentine's Day there is little to be lost by enthusiastically embracing those whom you love -- irrational exuberance in the pursuit of affairs of the heart generally holds the potential for far greater upside than disappointment. Boldness and aggressiveness in matters of love is often the correct approach on a statistical as well as emotional basis. Unfortunately, the same usually can't be said about the stock market.

The stock market may offer rewards when we throw caution to the wind but nothing so glorious as the reciprocation from the human objects of our affections. The risk that our bullish affection may not be reciprocated by Mr. Market is not only high but extremely painful to our financial well-being.

Although the market has shown some solid signs of improvement it is prudent that we maintain a fairly high level of caution and not fully embrace the long side at this juncture. The semiconductors are certainly acting in a flirtatious manner and the DJIA is downright seductive but we have been used and abused by those fickle maidens in the past and there are some signs that their love may not be as pure as it first appears.

The biggest warning sign that the market is setting up to break our hearts once again is the mixed condition of the Nasdaq. The rally on Friday certainly helped matters but the index was still negative on the week. There is substantial overhead lurking at around the 50-day simple moving average of 2104. It is up to the technology stocks to lead the way.

If they can take a leadership role at this time and follow through on the action we saw Friday, it bodes well. Intel (INTC:Nasdaq) is going to be the key stock to watch.

In my preparations to return to work after the birth of the Milk Shark last week, I was rather surprised at the limited number of stocks worthy of being put on my watch list. The action on Friday was much more concentrated in big-caps than I had first thought given the strong breadth.

I'm coming into the week in a very defensive posture. I'll be happy to be more aggressive on the long side but I have serious doubts about the longevity of the market's love for the bulls. Follow-through action in the technology stocks would go a long way toward winning our hearts but we should probably hold off buying any expensive gifts until we see further signs of loyalty.

The early action to start the week is just slightly positive. Chip stocks are doing well overseas although European markets are generally negative. Oil is up a tad and another telecom deal is helping to keep the mood positive.

I'm working to get back in tune with the morning after my absence and I hope to be back to full speed shortly. Thanks for all the kind notes about the birth of my new son. Also my thanks to Cody Willard for doing a stellar job in my absence.

Gary B. Smith: