Thursday, April 19, 2007

DJIA Hitting Another All-Time High Despite Perceived Headwinds

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, I-banking longs, Biotech longs and Energy-related shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly negative as the advance/decline line is lower, sector performance is mostly negative and volume is above average. Today's performance, however, is very impressive considering the market's near-term overbought state, recent yen strength, emerging market worries and more negative comments from homebuilders. The Nikkei is indicated up 80 on the open tonight. I suspect that many investors put out additional shorts or took profits this morning. The recent healthy consolidation over the last three days, makes another upside surge in the major averages more likely. Gilead Sciences (GILD) is trading near session highs, up 4.4% to another all-time high. I suspect the stock will break above $100 in the second half of the year on what I believe will be a number of upside catalysts. I continue to like the biotech sector, and GILD remains my favorite stock in the group. I remain long the stock. Intuitive Surgical's (ISRG) open interest put/call ratio is 1.18, near its historical high. As well, short interest in the stock is near a historical high at 3.6 million shares, which is about 10% of the float. I expect the company to report good results after the close. As usual, though, the guidance will likely be conservative. I will use any meaningful knee-jerk weakness to add to my long position. The current macro environment is very good for this type of company, in my opinion and I expect it to continue to significantly outperform through year-end. I expect US stocks to trade mixed-to-higher into the close on lower energy prices, bargain-hunting and short-covering.

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