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Thursday, November 18, 2004
Market Recap
The market is moving at a snail's pace while many of the high beta stocks we are tracking have had wild swings in the past few days. The indices are boring at times and they are a lot less volatile than some of our bulletin stocks. Today the indices barely budged with the Dow gaining +22 points, the NASDAQ gaining +4 points, and the S&P gaining a mere +1 point. This recent slow progress is signaling the market wants to rest or pullback. There maybe a week or two of healthy backing and filling and that would be a good thing. The market is ahead of itself and needs a small pullback of sorts. I have a chart tonight of the NASDAQ showing how far it has come. It has moved straight up in the last few weeks and if a minor correction occurs, do not be surprised and do not panic because this would be normal corrective action in a bull market. In fact, tonight's chart of the NASDAQ shows that a pullback of 100 or more points is possible but still would not send us into bear territory. A rest of a week or two would be very constructive for this market after such a huge and fast run-up. The bull market is definitely here, however, I think we are due for a pullback and our NASDAQ chart tonight reflects this.
Mega Merger
Just a few nights ago, we had a commentary about mergers and acquisitions. We predicted there would be many over the next year but who would have thought that Kmart and Sears would merge? I certainly could not have predicted that. That gap up yesterday gave us a 16% gain on our position in KMRT. The stock ended up dropping all the way back to the buy point. In hind sight, we should have sold but I did not think it would fill the gap since the stock had been so strong. We were lucky this time and picked up a very solid stock while the crowd was selling in sympathy of the disappointing Walmart earnings report. We bought the day before the merger news on the pullback. Makes you wonder if the analysts knew the deal was coming and took advantage of the drop in KMRT shares? These guys do not miss a beat.
More Good News
Good news yesterday from the housing sector; October housing starts were very strong. Consumers are building homes like crazy and borrowing money before the Fed raises interest rates in December. Hewlett Packard also put out some very solid numbers and that is good for the tech sector. There are clear signs that technology spending is on the rise and we should see that continuing into 2005. More solid economic news yesterday was an increase in factory output. Production is increasing across the general manufacturing groups. The tool and dyes are made ahead of time to handle the manufacturing. So an up tick in this sector is a good sign of things to come. The numbers were quite solid, up .7% while the expectations were for a rise of .4%.
Bull Market Is Here To Stay
I would like to stress a point here that I have mentioned before; there are very clear signs that the bull market is coming back around. We have been sticking it out in recent months, preserving our cash and preparing for the coming bull. I think we are just starting to see what the markets will be doing in 2005. If you know anyone who has been sitting on the sidelines waiting for some analyst to tell them the bull is back, you might want to let them know that it is already here. Do not let them wait for an analyst to tell them, because by that point, the markets will have been running strong for several months. So get the word out, the bull is back. After a brief rest, we should be underway again with the next leg up.
Not many new charts to show tonight, with so many stocks making huge moves over the past few weeks, most need a rest and many of them have started their pullbacks already. By next week the charts will have set up and we will have plenty more stocks to choose from. A rest of a week or two would be very constructive for this market after such a huge and quick advance.
Reminder
There will be no bulletin on Wednesday evening November 24th as markets are closed for Thanksgiving Day holiday on the 25th. There will also be no bulletin on Thanksgiving evening for Friday's half day of trading. Tuesday November 23rd will be the last bulletin next week. The next bulletin after that will be Sunday November 28th. Wishing you all a wonderful happy Thanksgiving.
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