Beware of the Bear Market Rally
Posted on February 27, 2008
Filed Under Market Speculator |
6:10am EST Stocks rise on news IBM buying back shares, but stumble into the close as Commodities remain HOT.
Stocks set the stage yesterday by opening lower on a higher than expected PPI. Inflation is most likely knocking on the door yet many do not realize. Ignoring the inflation front, investors turned to IBM and its plan to buy back shares. This got stocks out of the their rut and into higher ground. The run was lead by beaten down names like MSFT and INTC. Not typical leadership in a bull market run. Volume was higher on the NYSE and NASDAQ yet below their respective 50dma.
There is a bullish undertone to Wall Street now. Many traders are now going to feel left out along with retail investors. We may see another few percentage points higher on the indicies but fear will creep back into the market. The Dollar index is at new lows, crude oil is at 102, and commodity prices are racing higher at unbelievable clips. AT some point we’ll feel the effects of higher commodity prices as these prices seep into the products we buy.
Cotton is one commodity that is read hot, corn and sugar remain read hot. Cotton, reaching new highs every day will certainly impact the way every single product produced from cotton will be priced. The impact to the consumer will not be known as we’ve seen Crude Oil race into the 100s without much slow down from the economy. However, pile on foods and grains prices on top of the cost of crude we may see the consumer get squeezed even further.
This market is most definitely hard to play at the moment. JJA and JJG are great commodity ETFS that keep pushing new highs. On the flip side, be weary of going long anything that is or resembles: GOOG, AAPL, RIMM, MSFT, BIDU, FSLR, SOLF.
I would be taking profits quickly and protecting capital as this rally hasn’t proved to be a worthy one to go 100% long.
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