MARKET COMMENT
January 11, 2007
It looks like a short-squeeze to me.
Going into the second week of the year marked
by some tax selling in equities and a commodity price collapse many short-sellers
thought a correction was at hand.
But,
with the continued reality of extensive M&A activity [$215B raised for
private equity funds 2006], $2T in hedge funds, stock buybacks [an estimated
$600B reduction in available shares], a world awash in liquidity [“cash” my
friends, courtesy of generous central bankers], and recycling nearly $1T in
petrodollars back into financial assets—well, only the Three Stooges would be
short.
Buyers have repeatedly stormed the markets like pre-holiday midnight
shoppers at WMT when they find the news to suit their obvious bias.
New product news from AAPL, followed by
excellent earnings from AA and DNA, a stronger dollar not to mention falling
energy prices opened the doors to a buyer’s stampede.
Just get out of the way or you’ll end up like Curly!
And, while advance/decline data has been wishy-washy, not so
today.
At the beginning of 2006, the conventional wisdom of Wall
Street analysts was to sell small and mid-cap sectors and rotate to big
caps.
They were wrong initially as the
former rallied until May and it wasn’t until early August that big cap sectors
took the lead, but did so in a big way.
In 2007 the mantra has been, “get out of energy and buy tech”.
They may be right this time although tech
seems resting on just a couple of names like AAPL and GOOG.
For tech to really get going, semi’s have to
join the party.
Otherwise it’s just too
narrow an advance.
Tech’s are leading the way higher
no doubt as commodity sectors sell off and other sectors try to keep pace.
Meanwhile, overseas conditions are volatile but price
corrections seem relatively shallow thus far.
The bulls are still in control and have weathered what
appeared to be pent-up early January tax selling.
Lower energy prices are a good thing and, as
so many have said, act as a tax cut should they hold at lower levels.
The switch to tech seems to be gaining believers and
traction.
While I’d like to see more
positive participation from SMH you can’t have the bases loaded all the time.
Have a pleasant evening.
Disclaimer:
Among
other issues, the ETF Digest maintains positions in: IGN, FDN, QQQQ, SPY, DCR,
MDY, PZJ, PZI, GLD, EWA, INP, ILF, EEM and IEV.