Painful
Complacency
By Duru
February 13,
2005
Last week
ended with gains for the Dow and S&P 500 and a nearly flat NASDAQ. The post-earnings complacency
is so far playing out but the road there sure was painful! The Dow and S&P
500 took big dips on Wednesday before recovering quickly to end the week with
smiles. The NASDAQ recovered very late from Wednesday's selling and now lags
the market. I had expected it to follow in step and conquer the overhead
resistance represented by the 50 DMA. If the Dow and S&P 500 manage to get
capped by their 52-week (and multi-year) highs (as I am still predicting), then
it could be "game over" for the Nazz… Take close note that as I
suspected the low readings on the VIX needed to be worked off before the
indices could move higher in the short-term…Sure enough, after languishing
Monday and Tuesday, the VIX took a big leap on Wednesday.
Let's take a
quick look at some of my other calls and claims from last week (please see disclaimer here):
Apple forgot
to carry its buddies along last week. Witness the shelling in SYNA as
speculation runs wild about a loss of business with Apple. Witness the renewed
selling in PLAY (no one seems to really know what's going on here). Only ADBL
and SGTL are trying to hang tough after being taken out in sympathy with their
Apple supplier brethren.
Smith
Barney has joined the club in trying to call a top in the housing stocks. It
was actually a neat little trick allowing the analyst to stay bullish with buys
on several housing stocks while cutting price targets. Given his startling
revelation that "…as earnings deceleration occurs, it will usher in a
period of more modest stock price performance," he also threw in some
obligatory downgrades to hold. It was a classic case of wanting to call a top
but not wanting to miss additional gains in case the madness continues. After
the dust settled, the housing index made a nice little "hammer"
that I suspect will lead to more buying and new 52-week highs.
MACR, COO,
IMAX, VLO all made marginally higher new 52-week highs while MSO, AZO, JWN, and
ERTS pulled back into nice pockets with buying potential. LSI churned out a
further push higher while AUO stalled out and
I am not sure
what to expect for the rest of this month (do we ever really know what the
future holds?!), but the drama is getting thick. Some new highs on the major
indices will certainly invite more buying. Let's see whether the sellers are
just as diligent in trying to punch in another false break-out.
Regardless of
how things play out, as always, be careful out there!