Shift From Blue Chips to Tech Starting?

Monday saw unusual movement in the various major indices. While the Dow was slightly lower, the S&P and NYSE up marginally, the NASDAQ powered ahead 20 points. As Friday was options expiration day for May, we can expect to see more of a realistic trading pattern for at least the next three weeks. Earnings for the first quarter are largely behind us, so the markets should move on M&A activity and economic reports.

Additionally, the price of oil and motor fuel should play significant roles in any movement over the next month. US motorists have just about had it with the managed price escalation by Big Oil. Unfortunately, there's little the US consumer can do about it. Nearly everybody in America owns a car out of necessity, except where public transportation is functional, like New York, Washington D.C. or Chicago.

Even in the grand metropolises, public transportation is either incomplete or only a portion of the total people-moving mechanism. Americans are overall tied to their cars and there's no easy solution. Therefore, gas prices are at a point right now that they are eating into disposable income in some classes. In the lower classes, high fuel costs are eating into necessities like food and health, and in some cases, savings.

Dow 13,542.88 -13.65; NASDAQ 2,578.79 +20.34; S&P 500 1,525.10 +2.35; NYSE Composite 9,897.46 +3.72

Keeping with the theme, light crude on the NYMERC shot up another $1.33 on Monday to settle at $66.27, the highest it's been in months. With summer driving season ahead and the American oil companies firmly in control of the pricing, the government, and soon, our wallets, don't expect any relief through the Memorial Day weekend at least. We're being gouged but good, and between our brain-dead (and oil rich) President and the supine Congress, the American public is on its own here. It's either fish or cut bait, or, more appropriately, drive or ride a bike.

Advancing issues held sway over decliners by a 5-3 margin (2-1 on the NASDAQ), and you wouldn't know it just from the headline numbers, but there were an impressive 540 new highs and just 71 new lows. For what looked on the surface like a dull day, there was plenty of movement out of the blue chips on the Dow and into mid-cap tech stocks. Whether this trend holds up over the short and long-term remains to be seen, though this kind of cyclical rotation is normal in bull markets. Sellers are taking profits and re-investing in what they may view as undervalued sectors. Tech is still rebounding from 2000, though it's been growing exceptionally, especially in the internet and computing space.

Gold was up $1.80 and silver gained 13 cents. Both of the precious metals have been depressed for over a year now - not so precious.

Update on Marvel Enterprises (MVL): Well, like I said in my original post on Marvel, the price decline after a stellar earnings report was more options-related and short term profit-taking than anything else. The stock dropped to a low of 25.50 on Friday, the options expiration date for May. Marvel finally closed at 26.25 as the week ended. On Monday, investors could not get enough of the Spidey-stock, boosting it 2.10 (8%) to a finish at 28.35. Volume was 4 times normal. The die has been cast. This one's a keeper in a big way. I re-reinterate my buy recommendation and price target of 38-42.

Best Job In America: Do-Nothing Fed Governor

How would you like to have the entire financial community hanging on your every word, meet with your buddies 8 times a years and generally be rewarded handsomely for doing just about nothing?

If that sounds like a sweet gig to you, maybe it's time to look into becoming a member of the Board of Governors of the Federal Reserve. Naturally, some background (make that a lot of background) in economics is a necessary part of the resume, but once you're in, the perks are substantial and the hours are better than those of even the best-paid banker.

For 6 consecutive meetings the Federal Open Market Committee (FOMC) has met and done nothing. Sure, under the guidance of new chief Ben Bernanke, they were supposed to keep the economy cruising and hold the line on inflation, and they've achieved one of those objectives... well, maybe not, but they've managed to get through the last 10 months without changing the federal funds rate (the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight) and they aren't expected to do anything about it when they meet tomorrow, May 9, so make it a 7 in a row and a year of doing nothing. Not bad.

While some self-proclaimed experts are calling for a rate decrease, the nearly unanimous opinion is that the Fed will - and should - do nothing. America is pretty stable with a 5.25% fed funds rate, though the first quarter GDP (+1.3%) was the weakest in four years. While lowering the rate may prevent a hard landing later in the year or in 2008, is anybody really prepared to offer the oil companies any incentive to raise gas prices any further?

If anything, America needs to tighten the old economic belt a little. We're still wallowing in the aftermath of former Chairman Greenspan's unprecedented credit creation cycle, epitomized by the bust-up in the mortgage markets and a generally ailing real estate market.

And while loose money isn't exactly sound monetary policy, Wall Street isn't exactly complaining - today's modest decline was only the 4th down day for the Dow in the past 28 sessions.

So, after 2:15 pm tomorrow, expect the stock markets to get back to business and go on another in a long series of shopping sprees. Corporate profits have seldom been as good as the past couple of years and the 1st quarter of 2007 has turned out to be nearly exceptional across almost all industries.

Dow 13,309.07 -3.90; NASDAQ 2,571.75 +0.80; S&P 500 1,507.72 -1.76; NYSE Composite 9,788.03 -37.06

Market Internals: Declining issues held sway over advancers by nearly a 3-2 margin. New highs: 303, new lows: 88, in line, considering the A-D showing.

Oil kicked up a bit after 6 consecutive sessions of declines, gaining 79 cents to end up at $62.26, a manageable level which could actually auger - dare I speak - lower, or only moderately higher prices come summer. Consumers have had about enough pain, especially those driving trucks or SUVs which routinely take $80-100 or more to fill up.

Gold, again tantalizingly close to the $700 mark, backed off $3 to close at $687.40. Silver finished the day down 4 cents at $13.60.

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One to watch: Marvel Enterprises (MVL), the people behind Spider-Man, turned in blowout numbers Tuesday morning, though investors thought best to sell into the news. The stock was down as much as 0.84, but gained all day to close down just 0.20 at 29.40. There could have been some options and short shenanigans going on, but the future of the company is still somewhat cloudy as they continue to move parts around. Significant is that Marvel will be making most of their own movies in 2008, as opposed the current practice of licensing their character rights and receiving only a portion of box office receipts.

Analysts expected 35 cents per share, but Marvel shocked with 56. 2007 profits are expected to at least double last year's, so the good news is already partially baked in or the stock could continue to run. It's gone from below 20 to a peak just over 30 in the last 9 months and may be in a consolidation phase. Still, the stock looks like a keeper, a good bet to hit the 38-42 range by next summer.