Wednesday, December 26, 2007

Stocks Mostly Higher into Final Hour, Led by Small-caps

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Semi longs, Software longs and Medical longs. I added (SIGM) long and took a small profit in my (BRCM) long today, thus leaving the Portfolio 100% net long. The overall tone of the market is positive today as the advance/decline line is higher, most sectors are rising and volume is light. Investor anxiety is above average. Today’s overall market action is mildly bullish. The ten-year yield is rising another 7 basis points and copper is rising again on less economic pessimism. Small-cap shares, especially small-cap “growth” stocks, are again leading the way. The TED spread is dropping another basis point today to 151 basis points, which is down 70 basis points in 10 days. It is also down 89 basis points from its August high, which is a big positive and a sign of diminishing credit market angst. Financials are mixed with I-Banks slightly higher and Banks lower. The NYSE Arms and total put/call have been above average all day. Given recent gains and how light volume has been today, it is impressive that the bears weren’t able to make any headway. One of my longs that I disclosed early in the year, American Superconductor(AMSC), is hitting another new high today, likely due to its exposure to the increasing use of wind energy in China. The stock is now up 232% for the year and I see further meaningful gains in the shares next year. I expect US stocks to trade mixed into the close from current levels as profit-taking and higher energy prices offset diminishing credit market angst, less economic pessimism, seasonal strength and short-covering.

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