MARKET COMMENT
February 26, 2007
Has anybody spotted Gordon Gecko snooping around Wall &
Broad?
Today began another round of LBOs
or in contemporary terms, “private equity” transactions beginning first with
TXU [Texas Utilities] and later rumors of a bid forthcoming for Dow
Chemical.
These are bullish activities
since beyond the obvious boost to current equity prices there looms a decline
in the supply of stock issues.
The following is a “weekly” chart of XLU and you can see the
epic bullish run it has taken that has, even prior to today, driven its value
beyond the highest valuation expectations.
As we noted last week, utilities may become the next dotcoms, which is
pretty silly.
So given all this seemingly bullish news what spooked the
markets and drove them lower after a positive opening?
Greenspan, speaking in Hong Kong stated that
a recession in the US
was possible later this year as he felt corporate profit growth would
wane.
A negative message from the
maestro put a damper on things.
Further,
the ongoing risks from Iran
and other bad actors continue to make investors nervous.
In fact, Israeli website Debka lays out some
chilling possibilities in this story here.
These news items combined to put a continuing bid under
commodities, precious metals and bonds.
Meanwhile stock markets got pretty excited early given the hoopla
surrounding TXU and DOW.
The mood turned
sour quickly as Greenspan’s comments coupled with more concerns rising from the
Middle East drove investors to either sell or
just sit on their hands.
And, overseas markets are just sort of losing their previously
uniform bullish trends.
That should wrap it up for the first day of the week.
Markets were pushed around by conflicting
news with bullish sentiment driven by more M&A activity but bearishly by
Greenspan and geopolitical tensions.
As usual for us we’re just watching the “weekly” charts to
give us the guidance we need.
The
problem of course is the tenacity and patience you must maintain throughout any
week.
And this week there should be plenty
of news to test your nerve.
Have a pleasant evening.
Disclaimer:
Among
other issues, the ETF Digest maintains positions in:
XLU, RTM, DBC, DBE, DBP, SPY, MDY, IWM, UWM,
QQQQ, FDN, IGN, PZD, EFA, EEM, ILF, EWW, EWZ, EWC, EWA, EWJ and EWM.