This morning I heard CNBC's Joe Kernan quote a source that said that 2006 valuations look very similar to those in 1995. He basically went on to say that if 2006 provided the same returns as 1995, the market could be up 30% next year.
Just a few short weeks ago, many were questioning whether the market had enough steam to provide investors with a year-end rally. Now that the market has broken through key resistance levels, euphoria in the market could be next.
According to UBS market strategist Peter Lee, the markets could be heading toward a major blow off in the weeks and months ahead. Peter is an excellent market technician, and he has gone against conventional wisdom more than once or twice.
The question that remains is should investors join in on the markets new found life, or just sit this one out. I guess if you are an aggressive investor, you could jump in on the markets the latest momentum, but the average investor may want to sit this one out.
At this stage of the market rally, the most prudent approach from here is the accumulation of cash. As we get 6-9 months into 2006, we will probably see significantly better buying opportunities.
OIL STOCKS REMAIN SOFT
According to the latest Commitment of Traders Report (CFTC), large speculators continue to increase their short positions in crude oil. The latest Energy Information Administration (EIA) data showed that crude oil inventories were in line with expectations.
The softness in crude may be signaling a weaker economy in the months ahead.
We are sticking with our three energy plays despite the weakness in energy prices. Chesapeake Energy (CHK) has had an enormous amount of insider buying by the CB-CEO. Marathon (MRO) has got to be one of the best takeover candidates since the purchase of Unocal. And, Exxon (XOM) is buying back massive amounts of stock, and will probably announce a dividend rate hike soon.
INSIDER SELLING PICKING UP
Here are the daily totals of insider buys and sells according to insiderscoop.com.
11-21-05 B81 S246
11-22-05 B92 S268
11-23-05 B99 S301
11-25-05 B112 S347
Today B8 S52
By far, the most active sellers of any one stock has been among the Google insiders. If the future prospects for the company are as great as what is being touted, then why has the selling in Google been so massive, as well as consistent?
RETAIL STOCKS
We have had nice gains in our 2 retail stocks, Wal-Mart (WMT) and Best Buy (BBY).
The vice-chairman was on CNBC this morning and his comments sounded more like a commercial than a question and answer session. That aside, given the tightness in most consumersÂ’ wallets right now, Wal-Mart looks to benefit from consumers with less discretionary money to spread around.
Best Buy has become the recipient of the desires for laptops, flat screen TV's, and other techno-gadgets. We will be patient with both stocks for a few more weeks.
Overall, despite the markets new found life, we prefer to remain cautious.
