Sunday, May 15, 2005

Weekly commentary

For the past couple of weeks, I have been saying that we need some ingredients in the market, in order to see a bottom. Now I saw a number of surprising developments, which bode well for the future direction of growth stocks.

First, we all know interest rates are rising, right? Not so fast. Bond yields have just recently reversed course. They're coming down. The 10-year T-bond now yields 4.12%, a 3-month low, and down from a recent peak of 4.62% on March 28. I don't expect bond yields to continue falling, but the fact that they stopped rising is general good news for the equity market.

Secondly, the dollar is falling, right? Not quite. On Friday, it hit a 7-month high against the Euro.

Thirdly, the price of oil is rising, right? Wrong again. Crude futures broke decisively below the psychologically significant $50 a barrel mark last week. Friday's close was $48.67, just 13 cents away from the 3-month low set on Thursday and not too far away from my $47 target.

Lastly, tech stocks are lagging the market, right? That's been true for most of the year, but wait. Since April 29, the NASDAQ Composite, a proxy for tech stocks, has been performing quite well, easily better than the Dow and the S&P. The NASDAQ has outperformed the Dow in each of the past nine trading sessions, and has outperformed the S&P for eight of those nine.

So overall I have seen something I really like cooking for a bottom. but, as always, my stance is subject to change as i re-evaluate market conditions daily.

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