Thursday, February 15, 2007

Stocks Slightly Higher into Final Hour on Lower Long-term Rates, Positive Housing Data

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semiconductor longs, Biotech longs and Telecom longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is about even, most sectors are rising and volume is above-average. The Import Price Index for January fell -1.2% month-over-month. Moreover, the five-month average of month-over-month import price declines is -0.86%. It has only been lower during three other periods since tracking began in the 1980s. It was lower in November-December 2001, March 1998 and March-April-May 1991. Think about those periods and then think about the global economy now. I continue to believe problematic inflation in today's macro environment is a myth and that deflation from Asia will return during the next meaningful global downturn in economic activity. Those focused solely on gold, in my opinion, are completely ignoring the fact that many commodities are still in the grips of a historic mania. I expect US stocks to trade mixed-to-higher into the close from current levels on declining long-term rates, positive housing data and short-covering.

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