Bull Trend Intact
[Market commentary by "exbondguy " on TECD Y! board]
Nice week for TECD - made a 52 week high (as did rival IM) and closed up .90 on the week and is now up over 9% YTD. No real news anytime soon, as IM doesn't report its December quarter until February.
The market acted pretty much as I expected this week (except for getting me REAL excited Wednesday morning, only to fade that afternoon) - it continues to vacillate between short-term overbought conditions and an increasingly bullish intermediate or long-term trend (that debate will get settled in October!). While QQQ could not advance from its early December level (essentially only matching it), all of the following made post 9/11 highs this week: DJIA, S&P 500, S&P 400 Mid-Cap, S&P 600 Small-Cap, Russell 2000, NASDAQ, and, most importantly in my opinion, SOX (Phil Semiconductor Index). SOX has historically been the best predictor of the rest of technology, though it is very volatile. I expect that it will outpace the NASDAQ this year, but it will come in second place to Software.
As I have been suggesting, the tech sector and small-cap continue to be the dominant themes. At one point this week, YTD returns in the S&P 500 for the Tech sector exceeded those of the Health sector by more than 12%. Clearly, this is not a sustainable pace, but it shows that professionals are trying to reposition their portfolios. Also, some of the big Tech names were evidently sold for tax reasons or window-dressing reasons in December, and they have been coming back strongly. Some examples off the top of my head are EMC, my beloved BEAS, and perhaps CSCO.
The most bullish news of the week in my opinion was the Greenspan speech. We don't have to worry about the FED raising rates anytime soon. For those who have followed Big Al for a long time, it should be clear what he is doing: talking down long rates. In December, I changed my tone about interest rates after having been negative on bonds during the crisis. I suggested (and continue to believe) that the 10yr should trade in a range of 4.625%-5% roughly. The Fed Funds rate will be low for a while, and inflation is not even remotely a risk at this time in which commodity prices are under pressure and our factories are working globally at very low utilization. The good news for all of us who are waiting to refinance again is that mortgage rates should be coming down. Year-end financing issues, unusually wide spreads in corporates (competition for mortgages) due to deteriorating credit and a back-up in rates have left mortgage rates higher than they should be. Additionally, so many people were squeezing through the very brief window in October that the system got jammed and the lenders did not have to be as competitive as they normally are. So, I am excited about the prospects of getting a mortgage with a 6 handle on it in the coming months after starting out at 9 in 5/00 and moving to 7.5 last January. Now, what can I do about the rising property taxes?
I hope everyone has a great week - perhaps this is the week that aero gets to reset his short call position on TECD! For those looking for new ideas for long-term growth stocks, I suggest that they look in the Health Care sector - it seems that momentum is changing for the better and the valuations are a lot better than they have been in a long time. Not quite as cheap as the beginning of 2000, but there are lots of bargains in specialty pharma. Evidently, Bush is close to appointing a new FDA head, something that could be a catalyst. Personally, I have been changing my focus from pharma to service providers. Good Luck!
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