Monday, February 26, 2007

Stocks Finish Only Slightly Lower on Another Afternoon Rebound

Indices
S&P 500 1,449.37 -.13%
DJIA 12,632.26 -.12%
NASDAQ 2,504.52 -.42%
Russell 2000 823.69 -.36%
Wilshire 5000 14,644.24 -.16%
Russell 1000 Growth 573.00 -.30%
Russell 1000 Value 835.38 -.03%
Morgan Stanley Consumer 709.49 +.04%
Morgan Stanley Cyclical 971.90 +.12%
Morgan Stanley Technology 585.07 -.63%
Transports 5,036.72 -2.37%
Utilities 493.71 +2.63%
MSCI Emerging Markets 117.43 -.46%

Sentiment/Internals
Total Put/Call 1.02 -28.17%
NYSE Arms .92 -29.62%
Volatility(VIX) 11.15 +5.39%
ISE Sentiment 96.0 -4.95%

Futures Spot Prices
Crude Oil 61.49 +.57%
Reformulated Gasoline 178.0 +.96%
Natural Gas 7.54 -2.68%
Heating Oil 175.55 +.29%
Gold 690.50 +.55%
Base Metals 245.22 +1.58%
Copper 286.80 +.60%

Economy
10-year US Treasury Yield 4.62% -5 basis points
US Dollar 83.94 -.13%
CRB Index 315.10 +.15%

Leading Sectors
Utilities +2.63%
Papers +2.06%
Homebuilders +1.48%

Lagging Sectors
Oil Tankers -1.03%
Airlines -1.20%
I-Banks -1.64%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Piper Jaffray:
- Rated (BLDR) and (HWCC) Outperform.

Afternoon/Evening Headlines
Bloomberg:
- Nordstrom(JWN) said fourth-quarter profit rose by 22%, less than analysts estimated, on increased sales of women’s clothing. The stock fell 3.2% after-hours.
- The Bush administration wants Congress to give it the authority to speed up the process for issuing power-consumption standards for items ranging from refrigerators to traffic lights, Energy Secretary Bodman said.
- Natural gas declined 2.3% today in New York on speculation that demand for the furnace fuel will ebb as winter’s chill eases and spring approaches with inventories at very high levels.
- Brocade Communications(BRCD), the world’s largest maker of switches for data-storage networks, said first-quarter profit more than tripled on increased demand for storage systems. The stock surged 6% after-hours.

CNBC:
- Sandy Weil, former Chairman and CEO of Citigroup(C), said the US sub-prime mortgage market is not big enough to hurt the overall economy.

AP:
- Iraqi Prime Minister Nuri al-Maliki said today his Cabinet endorsed a draft version of a long-awaited oil law and the measure will now be sent to parliament for approval.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Retail longs and Energy-related shorts. I did not trade this afternoon, thus leaving the Portfolio 100% net long. The tone of the market was mildly negative as the advance/decline line finished modestly lower, sector performance was mixed and volume was below average. Measures of investor anxiety were mostly higher into the close. Today's overall market action was just mildly bearish. REITs recouped about half of their morning losses, however the I-Banks finished near session lows. The fact that oil only rose .25 today despite many scary Iran headlines and snow storms is interesting. Apple (AAPL) just said it is delaying its Apple TV launch until mid-March. This stock is only a bit lower on the report. A number of "growth stocks" I follow rose today despite the mild losses in the major averages. The underlying tone of the overall market remains very constructive despite the many calls for a correction. As of mid-February, NYSE short interest stood at 9,600,000,000 shares. This is only 1.5% below the all-time high of 9,744,698,000 shares set in October of last year, despite the 20.1% gain in the S&P 500 since June 13. Moreover, since June of last year when the bull market began to pick up steam, short interest has actually risen by 5.6% or 512,690,000 shares. Finally, the S&P 500 has soared 96.6% since the October 2002 bottom, yet NYSE short interest has actually jumped 17.0% since then. It is also interesting to note that the second-largest overall short position on the NYSE as of mid-February was the iShares Russell 2000 Index Fund (IWM) at 158,547,715 shares, up from 130,408,917 shares in mid-January. Short-selling has been rising in the IWM this year notwithstanding the fact that it is one of the best-performing major averages, already gaining 5.1% year-to-date. I continue to believe the many bears remain stunningly complacent and that a meaningful short-covering rally will occur at some point later this year.

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