David Fry's Daily Market Outlook

Switch from energy to tech? Oh, you must have misunderstood me; I meant stay away from tech and buy energy. Well so it goes this merry month of January. There are many market pundits hoping you're on LSD or some such thing hoping you'll forget the original message.

Earnings from tech companies are rolling in after the close. Advanced Micro Devices Inc. (AMD) looks weak by taking heavy charges and looks light on their outlook. Yahoo! Inc. (YHOO) comes in with heavy charges related to options expenses and revenue also seems a little light. [There are rumors circulating that YHOO may be taken private. Maybe this is why the stock is up almost 6% in after hours trading.] Sun Microsystems Inc. (SUNW) is the big winner posting a profit of three cents versus expectations of a penny. The stock is up over 8% after hours. The NASDAQ 100 Trust Shares ETF (QQQQ) is up a nickel.

When we think of bonds an associated market is mortgages which primarily follow the 10-year Treasury bond. Now this "sort of" relates to the oddity of the homebuilder's as featured by streetTRACKS SPDR Homebuilders ETF (XHB). Today D.R. Horton Inc. (DHI) reported horrible earnings [that were only "slightly" better than crummy expectations] but that combined with an upgrade from Goldman Sachs Group Inc. (GS) put the stock up almost 5%. If you read this report from MarketWatch you can claw through it and not find much to like period.

Then in the odds-and-ends department there are a couple of sectors where there remains some opportunity.

Where else were money-making sectors today? Other than in commodities, most overseas related ETFs are still performing well.

Tomorrow and thru the rest of the week may see everything reverse again. You never know, energy could get soft and tech's hot again. That's the way things go especially in a tumultuous market that January can often bring.

Have a pleasant evening.

Disclaimer: Among other issues, the ETF Digest maintains positions in: NASDAQ 100 Trust Shares ETF (QQQQ), streetTRACKS Gold Trust ETF (GLD), PowerShares DB Precious Metals Fund (DBP), PowerShares DB Agriculture Fund (DBA), PowerShares Aerospace & Defense (PPA), PowerShares Water Resources ETF (PHO), iShares S&P Latin America 40 Index Fund (ILF), iShares MSCI Emerging Markets ETF (EEM), iShares MSCI EAFE Index Fund ETF (EFA), iShares MSCI Australia Index Fund (EWA), iShares Trust FTSE-Xinhua China 25 Index Fund (FXI), iPath MSCI India ETN (INP) and iShares MSCI Malaysia (EWM).

Comments

[S A:]

You keep complaining that XHB does not trade "fundamentally" - meaning you expect it do go lower while it consistently goes higher since bottoming in July.

Here's a thought: maybe XHB is trading, as equities tend to do, based on forecasting the homebuilders' turnaround (some 9 months out) which is becoming more and more plausible with each passing day.

2007 Jan 25 02:14 AM

[David Fry:]

Of course you're right. That must be the thinking. There is a secondary issue involving "value" investors using computer programs to chase down value plays based on current stock prices and "old" data.

I'm not smart enough to look out 9 months and see anything "plausible" as to the sector turning around. Beazer's CEO doesn't see anything today for the future either, and if he can't see it how can I?

The bottom line is not to fight the tape. There are many market sectors to choose from so one doesn't need to invest in everything.

2007 Jan 25 11:52 AM