Tuesday, June 26, 2007

Stocks Mixed into Final Hour as Falling Energy Prices Offset Lingering Sub-Prime Worries

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Internet longs, Medical longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is slightly negative as the advance/decline line is mildly lower, sector performance is mildly negative and volume is above average. Merrill Lynch is reiterating its buy on Bear Stearns (BSC), stating that concerns over its hedge funds are overblown. As well, Reuters is reporting that the U.S. House Financial Panel Chair is saying BSC's hedge fund difficulties won't lead to serious financial market problems. It is interesting to note that, with the recent renewed spike in housing worries, the November home price futures remain firm at $215,000. This indicates only a 1.8% drop in home prices from current levels. Moreover, the November futures are up from about $211,250 in April. The Case-Shiller Housing Index is up about 125% over the last decade. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower energy prices and bargain-hunting.

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