Almost on cue, the popular averages are approaching their early January high's. The market is running on fumes, but may have enough left in the tank to come close to the 11,000 mark one more time.
All of a sudden, the big market players are concerned with revenues. Given the number of earnings and revenue disappointments (IE- Alcoa
Dupont, eBay, Apple, Yahoo, Intel, IBM, CitiCorp, GE, and JNJ), the market is poised for a correction, or time out, for the next two months.
Today, was a sign of things to come when flash memory darling SanDisk (SNDK) said things are great, and Wall Street rewarded the company with a 12% haircut in its share price ( down $8.63, to $62.05 in the after-hours).
The IA portfolio is currently 50% in cash. We have been increasing our position in the Rydex Tempest 500 (RYTPX) to 10% of the portfolio
The internet stock rocket Google (GOOG) snapped back to the $450 mark yesterday (as we thought), and investors began selling into the rise. If Google suffers the same fate as SanDisk, we may see a significant correction down into the low $300's after the company announces earnings on January 31st. This is just a guess. Playing Google at these levels is a lot like playing the craps tables in Las Vegas.
The Housing Bust
It looks as if the slowdown in housing is becoming a reality. I know that some raised their eyebrows in doubt when I mentioned the reality of this happening several months ago. Now my warnings are no longer a prediction, but a reality.
Here are the latest comments from BCA Research (www.bcaresearch.com) on the lending market:
U.S. Mortgage Lending: The Last Shoe To Drop?
10:34:00, January 24, 2006
The U.S. consumer is showing signs of reducing its penchant for debt.
For the first time in the history of the data, the short-term growth rate of revolving consumer credit, revolving home equity, and personal bank loans has turned negative. This is a clear sign that already heavily-levered consumers are starting to retrench, a trend that has been fueled by a tightening Fed and sky-high energy costs. However, mortgage debt growth continues to be firm, thanks to strong housing demand and soaring house prices. Could mortgage demand be the next to fall? Given poor affordability, the odds are good. In fact, anecdotal evidence suggests the housing market has already come off the boil. We expect the slowdown to continue. Bottom line: the U.S. economy seems set to enter a consumer-led mid-cycle economic slowdown.
Mind you, I do not attempt to favor one side or another when I give my opinions. What I attempt to do is call them as I see them.
I've found the biggest mistake I can make as a investors is to fall in love with, or hate any stock, sector, or way of thinking. We must have the flexibility to assume that anything is possible, and that there are two sides to EVERY story, good or bad.
Big Boys Getting Short
The January 17th Commitment of Traders Report shows that the "big boys" (Commercial Traders) are expecting (creating??) a market sell-off soon. My guess is February. Here are how they are positioned:
DOW JONES INDUSTRIAL AVERAGE - CHICAGO BOARD OF TRADE
COMMERCIAL- LONG 16,260/ SHORT 28,637
S&P 500 STOCK INDEX - CHICAGO MERCANTILE EXCHANGE
COMMERCIAL- LONG 450,361/ SHORT 490,505
S&P 400 MIDCAP STOCK INDEX - CHICAGO MERCANTILE EXCHANGE
COMMERCIAL - LONG 5,801/ SHORT 10,165
NASDAQ-100 STOCK INDEX - CHICAGO MERCANTILE EXCHANGE
COMMERCIAL- LONG 31,078/ SHORT 45,273
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