Thursday, April 5, 2007

Stock Streak at Six Straight

The Dow added another 30 points on Thursday, the day before the markets take a break for Good Friday. While the Dow advance was reasonable, the NASDAQ actually outperformed on a percentage basis for the second straight day, gaining 0.51% to the Dow's 0.24. It's about time the bargain-hunting moved from the Blue Chips to the techs, and we could be witness to a dramatic shift in investor priorities shortly.

After all, many of the NASDAQ stocks represent relatively young, nimble enterprises, as opposed to the relatively stodgy businesses in the Dow 30. Tech is much better prepared to face the challenges of the 21st century and some of these companies are yet to embark upon long, long histories of solid earnings.

The Dow companies, on the other hand, are engaged in very segmented businesses which rely heavily upon manpower and raw materials. They are exposed to margin squeezes on the edges of their businesses and their ability to expand and react is questionable.

The Dow companies are, however, led routinely by strong managers and they have solid balance sheets. In this current market environment, though, it's all about profit and share price. Some of the Dow stocks are only going to levitate from M&A activity or aggressive cost-cutting, whereas the techs are innovative and potentially explosive (both ways).

Dow 12,560.20 +0.15; NASDAQ 2,471.34 +12.65; S&P 500 1,443.76 +4.39; NYSE Composite 9,426.97 +28.01

Volume was muted on Thursday, but that's nothing new. Market volume has been tepid for most of 2007. With earnings reports due next week and for three weeks after that, there's likely to be more trading, though it may not be any great shakes.

There's a strong rally brewing, as the numbers suggest. The new highs-new lows figures continue to be lopsided in favor of the highs, 396-69 on the day. Advancers held a 7-5 edge over declining issues.

Oil was under pressure, hitting a low of 63.60 before closing at 64.28, off just 10 cents. Gold gained $2, silver was up 12 cents, both again approaching the high ends of their channels. Something may be up. Then again, it could be nothing more than simple dollar arbitrage.

Happy Easter.

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