Thursday, February 5, 2009

Bad Feeling

This market action doesn't make me to feel good. Tech rally is good, sure. Apple (AAPL) and Google (GOOG) made new highs for the year, moving my portfolio a little bit up.

But I see problems with broad market. Despite today's rally we are way too close to the bottom of current Dow range. One slip and we are going down. I don't know where most of the traders keep their current stops, probably around Dow 7800. If we break this level, all hell might get loose. I just don't see any conviction in this market.

Fundamentals are awful. Some Tech companies are rallying because they have plenty of cash. They don't need any loans. Anybody who needs loans pays through the nose. Altria (MO) paid 587.5+ basic points over Treasuries for five year loan on February 3. That's one of the best companies in the world! Imagine what auto companies would have to pay! No wonder Ford (F) drew full amount from credit lines. They decided not to wait until those lines were closed under some pretext. And economic situation is simple: it's Great Depression 2.0.

Barely visible silver lining: corporate debt market started thawing. There is some movement up in bonds. If it's not a sucker's rally, things might start improving. Might. And Treasuries are down a little bit from their incredible high. Still very high though.

I'm waiting for January inflation data. If we see more deflation, as I expect, then we are in it for a long time.

One more strange thing is a movement in commodities. Most of them are up. Looks like China is doing some planned purchases. If it's true, all commodities might go down when China finished. Which also means that oil isn't going up any time soon, but might go down even more.

Last, but not least: gold is up. It's a huge mystery. India's import is down sharply, who's buying that 30% of production? Or maybe we see discrepancy between future market and real product again?

Let's wait and see.

Full disclosure: at the time of publication author had long positions in AAPL, GOOG, MO and no positions in other companies mentioned. Positions can change any time.

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