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Börsipäev 17. november

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  • Rev Shark:

    Expect Opening Spike in Market Up Without Rest
    11/17/2005 8:50 AM EST
    Just as a cautious businessman avoids investing all his capital in one concern, so wisdom would probably admonish us also not to anticipate all our happiness from one quarter alone.

    -- Sigmund Freud

    The biggest danger this market faces is that it not take the time to consolidate gains. When stocks or markets go straight up, they have a greater tendency to come straight down. As the profits mount in a runaway market, the greater the rush for the exits will be when things turn.

    The great dilemma that investors face is how aggressive to be in riding the wave of momentum while managing risk as the market becomes increasingly extended. While we don't want to be overly anticipatory and miss further upside, in a strong market we also need to be cognizant of the increased risk the higher the market goes without taking a rest.

    There is no easy solution to this problem. Our best hope is to stay vigilant and be prepared to move quickly as conditions warrant. Yesterday I discussed watching the market internals such as breadth, new highs, new lows, sector leadership, volume and so on. Those indicators were flashing some warning signs Wednesday that weren't reflected in the overall market action.

    But this morning the market is shrugging off its concerns and is set to spike higher at the open. The only news I see to account for it is very strong action overseas, particularly in Tokyo, where the Nikkei is up close to 2%. This sort of strength to start the day worries me, especially if it is due mainly to sympathy with the Japanese market. There has probably some short-squeeze component to it as well, but it seems it's the overseas strength that is the main driver.

    The earnings report from Applied Materials (AMAT:Nasdaq) is not being warmly greeted, and we need to watch to see if that has any impact on semiconductors. Gold is strong once again. I mentioned in my opening post yesterday that the group was looking ready to go and now it looks like momentum is kicking in. Gold at $500 per ounce doesn't look like an unreasonable target.

    We have some tricky trading ahead of us. This market sure could use a rest, but it isn't taking one, and that makes the bears and underinvested bulls very anxious and keeps things from dipping. You have to be thinking about shorting this open given these circumstances.

    Weekly unemployment numbers are out and dropped to almost 300,000. That is good news for the economy, but maybe not so good from an inflationary standpoint. Housing starts look to be roughly in line and the market has barely blinked.

    Position: No positions in stocks mentioned.

    Gary B. Smith:

  • Goldman Sachs downgrades Altria (MO 73.89) to In-line from Outperform, mainly due to an increasing concern that the timing of MO's break-up could occur much later than they previously thought

    JP Morgan downgrades ConocoPhillips (COP 64.70) to Neutral from Overweight, as they believe higher capital spending may pressure returns, production growth lags their peer group and the co is too big to pursue smaller upstream projects that would add meaningful volume growth to its smaller domestic peers

    UBS downgrades Deere (DE 63.77) to Neutral from Buy, reflecting their expectation that investors will increasingly view 2005 as a peak year for farm machinery demand and for earnings for DE, which should limit upside

    Merrill upgrades Union Pacific (UNP 71.00) to Buy from Neutral
    Merrill downgrades Canadian Pac (CP 41.08) to Neutral from Buy

    UBS cuts their tgt on SanDisk (SNDK) to $60 from $62, noting that yesterday at the firm's conference MOT said that in future 2006 MOT handset releases it was likely to deploy lower density NAND flash with its handsets and leave consumers to upgrade of their own volition. Also, firm says a variety of checks suggest that MU is drawing nearer a deal with INTC to develop NAND flash, most likely with an emphasis on wireless handsets. Firm also cites litigation uncertainty. Maintains Neutral.


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