Wednesday, November 14, 2007

Stocks Mixed into Final Hour on Healthy Consolidation of Recent Gains

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Retail longs and Biotech longs. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is slightly positive today as the advance/decline line is neutral, most sectors are rising and volume is above average. Investor anxiety is slightly above-average. Many market leading stocks are strong again today, and many secondary stocks are posting outsized gains. The U.S. Dollar Index is back near unchanged for the day, recouping morning losses. This is something to keep an eye on as a further acceleration in gains would likely begin to pressure commodities. The fact that the bears are unable to gain any downside traction in stocks despite the jump in oil and yesterday's huge gains is a big positive. Overall, I would classify today's action as a healthy consolidation of yesterday's gains. The MBA Mortgage Applications Index surged 5.5%, boosted by a 6.4% jump in refis. The Broker/Dealer Index is 2.5% higher despite another $1.2 billion writedown at Bear Stearns (BSC) and Massachusetts regulators accusing the company of fraud related to its hedge funds. Goldman Sachs (GS) credit default swaps have plunged 23.4% over the last week, which is a big positive. E*Trade (ETFC) is up another 14% on further buyout speculation. Stability in the financials has been a large broad market positive over the last few days. Today, the Rasmussen Investor Confidence Index fell to the lowest since March 20, 2003, which was on the eve of the Iraq war. This is more evidence of the extreme pessimism that currently permeates the investment landscape. I expect US stocks to trade mixed into the close from current levels as profit-taking offsets short-covering.

No comments: