Feb 15, 2005


Tonight quite a few stocks show up in good position for long entry. These stood out to me: ARRS, OVTI, RRI, ELAB, AMXC, EXAS, and EDGR. Computer Associates (CA), which had kind of a bad day, appears to have made a reversal off a new low with divergent momentum. If it opens tomorrow with a gap up it would be a good trade against today's low. Otherwise I would hold off for a move up on volume.

I am getting quite a bit more bullish on stocks in here. Partly because of the charts but mostly because of the negative sentiment. The markets have corrected a lot of the damage from January. The Nasdaq which has been underperforming seems to be coloring psychology quite a bit but with the semis looking extremely bullish and the internet stocks looking ready to participate I don't see that index remaining an obstacle for long.

My bullish feelings on stocks leave me a bit mystified about bond yields. I understand the short term dynamic with a strong move higher following the break out of the Q4 range, and as I said last week I would even expect a restest of the new highs. The strength in the commodity sectors and numerous new highs in foreign equity markets just makes a global slowdown seem very unlikely. Without that the Fed will keep going and a 4.40% long bond will look silly. Brad

Also, I apologize for the appearance of the site. Blogger seems to be having some issues so I am having trouble posting and can not get in to take down all the screwed up posts that eventually made it to the site from yesterday. Hopefully I can fix it shortly.

A couple of posts worth checking out are Brad Setser's discussion of why the global imbalances can't last and this article on the slack job market. The latter is so negative it almost feels like a bottom. If inflation does kick up in the next 3 months that may be the case.

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