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Financials Are the Key


It all comes down to the financials, which remain dead money.


Good morning, Minyans,

Yesterday the bears had another chance to press the market and spark the big nasty close. They couldn't do it and important levels held. All eyes remain on the 1490 level in the S&P and the 2770 area in the NASDAQ. So far both have held their ground and I am starting to wonder if the bears have enough fire power to finish what they started.

It all comes down to the financials, which remain dead money. It is quite clear that we aren't going to be able to gain much traction in other areas as long as stocks like Citigroup (C), Merrill Lynch (MER), Bear Sterns (BSC) and Bank of America (BAC) continue to plummet. It doesn't matter how cheap Google (GOOG) is on a valuation basis or how much growth (BIDU) is showing. If the US financial system remains unstable I believe it will only be a matter of time until the rest of the market begins to follow suit. On the other hand, if these depressed stocks can find at least a temporary floor, it may provide the confidence that is needed for buyers to step in and bid up other, more healthy sectors, and we could see a decent run into year end. It is still too early to tell what will happen, but I am preparing for both.

Today the big news is in the solar arena after First Solar (FSLR) announced a billion dollar contract last night. I had recently questioned First Solar's valuation but this contract definitely confirms why these stocks remain strong and continue to be in play. It is tough to chase those that have already run, but I am watching a few others, such as MEMC Electronic (WFR) and Trina Solar (TSL), that aren't as extended for entry points in order to ride the hot solar wave.

Both positions I discussed yesterday, Advanced Analogic (AATI) and Bruker Biosciences (BRKR) are holding steady and continue to look attractive. I am waiting for some strength to confirm the moves before looking to add, but am watching closely.

Remain patient out there today, and despite the early bounce, keep capital preservation as your number one goal.

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Position in WFR and AATI

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