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Random Thoughts

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...the path to profitability lies in the incremental journey between here and the destination.

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  • The Monday's have officially arrived as traders shake the fog and weigh the fray. The aggregate action is lethargic, at best, as NYSE internals assume the (2:1 negative) position and the S&P trend line comes under fire. After Friday's flux, some downside probage made sense. If greener screens are to arrive, however, it would seemingly have to start soon.

  • I begrudgingly sold further metal exposure out of this morning's gate with hopes of buying 'em back cheaper. The combination of a noice run and the firm dollar (not to mention chatter of a slower China) forced my hand and I've now got lotsa dry powder. I don't wanna be too cute on this--I love this complex with a long-term horizon--but the path to profitability lies in the incremental journey between here and the destination.

  • I would imagine that this is the last thing that alotta investors expect to see...

  • You wanna see something both spooky and serendipitous? The G-Double O-G (a.k.a. Google) is quickly approaching a meaty downside gap. A push lower through $453 will also break three bottoms and pave the way to the 200-day at $428ish.

  • I would think that they would have seen this coming?

  • With crude 3% lower and the CRB off nearly a deuce, the obvious question is whether asset class deflation (which is the other side of dollar devaluation) will soon migrate into equities.

  • All the while, the grabby greenback once again tickles important technical resistance.

  • What's next, a horse head in the bed?

  • With the brokers, nets and homies listening to chin music, I'm not making a bet that the trendline holds. And, as long as we're being honest, I'll offer that I'm not pressing the downside either. My cash balance is relatively high as I await the whites of ye market's eyes.

  • Keep an eye on the VXO (+5%) as vols continue their uptick. I'm still of the opinion that vols will trade appreciably higher in 2007. Have we already seen the lows? If I had a dollar to bet, I would wager that we have.

  • Note to self: If and when SunMicro trades near $6 or Goldenstar retreats to $3, remember that you're eyeing those levels as "zones of accumulation."

  • It's a good thing this didn't happen during a heat wave!

  • And finally, some top-line vibes from our pal Snoop Tony Dwyer of FTN Midwest Securities...

    • We at FTN are lowering our view of the Financial Sector from Favorable to Neutral due to recent EPS revisions, in line market EPS growth in 2007 and more neutral valuation levels.
    • We continue to have a FAVORABLE view on the Information Technology, Industrial and Consumer Discretionary sectors due to superior relative EPS growth, attractive valuations and significant potential for increased investor interest.
    • We have an UNFAVORABLE outlook toward the Energy and Materials sectors where there should be a significant loss of EPS momentum, negative EPS revisions and potential for a significant reduction in assets allocated toward the sector.
    • We would have become more favorable on the Health Care sector if Pharma didn't make up 52% of the sector. Other sector industries show EPS gains that should be superior to market, valuations that are generally attractive and technical patterns suggesting further upward momentum.

    • Conclusion: Despite the potential for a near-term pause given the recent gains, my firm continues to have a bullish outlook for Equities with a particular emphasis on traditional growth over value areas. This month's sector analysis continues to suggest those sectors with the best relative earnings growth, attractive valuation levels and potential increased investor interest include the Information Technology, Industrial and Consumer Discretionary Sectors.


R.P.

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position gss, sunw, metals, financials, energy
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