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Hey, that was really fun- can we do it again?

Let’s not get too excited yet, we did finish eight cents below that all-time high on the Dow - still not bad for a day we got hit with the GDP and the Fed. More than half the earnings are in and we were told by SanDisk (NASDAQ:SNDK) that there is a semi glut.

What’s most important here is that we are doing it this week without a lot of M&A activity. January has been, on the whole pretty quiet, maybe the calm before the storm. All is well in techland, the SOX recovered from a nasty dip. Google came in with stunning numbers (67% more revenues, triple profits) that got a big ho-hum in after-hours trading.

Roller Coaster

It was a very exciting day, big GDP (3.5%), calm inflation, a happy Fed, Bush came to Wall Street, Michael Dell came back from wherever he went, Altria (NYSE:MO) is finally spinning out Kraft, the Dow touched a new record and oil is back to $58.

Things are certainly looking up in the markets but let’s not get ahead of ourselves:

• Dow broke over 12,600 and held it!!
• Transports flew up to 2,814, totally ignoring the rise in oil.
• S&P closed at 1,438, two points shy of our goal.
• NYSE broke and held 9,250!
• Nasdaq held up nicely at 2,463.
SOX were rejected at 460, but that was far more than we were even hoping for - the bounce came at $450.91, not a bad morning guess!
Russell broke 800 which was indeed just the ticket we needed!

US Markets 01 02 2007 Chart

Oil gained another 2.1% today, closing at $58.14, which is the biggest two-day gain since December ‘04, yet the energy sector barely budged (less than .25%) as the inventory build was again a bearish surprise. NYMEX March barrels came down to 385M but they had to trade 279M barrels (30% more than yesterday) to add just 1,000 contracts. Despite all the trading, just 4,000 contracts were added to April, 2,000 to May and none to June.

Make of that what you will - homebuilders and the energy sector remain firmly rooted in denial, but those guys are so sure of their position that it forces us to doubt our own sanity!

The dollar had a terrible day after being rejected from 85.30 and finished at the days low of 84.60, this gave all commodities a great lift and gold shot up to $652 while copper punched back to $260.

Oil Dollar Gold 01 02 2007 Chart


Today was hugely busy as I followed through on my agenda to purge the portfolio as we need to have a manageable amount of positions coming into the more opportune moments of earnings season.