Confirmation

This week, the NIKKEI hit 17,000 for the first time in 5 ½ years. The NASDAQ also made a new 5 year high—confirming the earlier breakouts of the S&P 500 and Dow Jones Industrial Average.

The U.S. markets were driven in part by a few large names, most notably: GOOG, AAPL, MOT, BA, QCOM and the commodities sector. COMEX Gold, Silver, Titanium, Platinum and the Energy Sector scored sizable gains as well.

The market clearly looks buoyant—it appears for the first time since the bubble that the path of least resistance is higher.

The only thing that concerns me is the weakening internals, mainly the Advance/Decline line. In all fairness however, since we have been in a bull market for quite some time this is a natural phenomenon.

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Moving Averages on NASDAQ Weekly Chart finally turning north after a long hiatus. Still looks a little wedge-like (bearish), but still too early to tell.

Odds Are…

Odds are there will not be any change in the Fed’s statement. Rates will go up, inflation risks will remain, same old song and dance. If Bernanke is set to throw us a curve, this meeting in neither the time nor the place.

The Fed under Greenspan became quite adept at sending its Governors out to “tip their hand” so-to-speak about any meaningful policy shift. It has become a very useful tactic to allow the market time to discount futures moves and I would be surprised that Bernanke would alter this, the pragmatist that he is.

Finally, I just want to point out how terrible our markets have performed in relation to corporate profits. Either we have not emerged from the bubble hangover yet or there is something else at work. Many of the international markets that are directly dependent on the U.S. for output (mainly Japan and India) are on fire. The NIKKEI looks set to burn through 17000 and the SENSEX took out 11000 last week (another all time high).



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30 Year Treasury Yield remains under 5% despite the Fed’s intentions.

Google Gets Respect

Last night, Standard and Poor’s announced that Google (GOOG) will be replacing Burlington Resources (BR) in the coveted S&P 500 Index. In after market trading, Google was up over $32 or 9%, back to the mid 370’s.

The rumor that GOOG would be added had been swirling around for some time, often making its way to news desks—thereby prompting short sellers to cover and giving the stock a lift. Now it is finally true.

After going public in August 2004 at $100, GOOG has been one of the best overall performers in the entire market.



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GOOG appears to have successfully tested its 50 day Moving Average

A Not-So-Beautiful Vista

Last night Microsoft announced their new operating system titled “Vista” would be delayed, yet again, from November to January 2007. It will most likely be available for business/corporate clients first; but missing the all-important holiday season for consumer sales.

In the aftermarket Tuesday, MSFT shares sank roughly 2.5% on the news in ECN trading and is sure to weigh on the major averages this morning. With a market capitalization of over $280 billion, this affect will surely be felt (and is already hurting futures this am).

This is a huge disappointment on the heels of the new Project Origami that has whipped up some excitement surrounding the company’s future after being largely dormant this decade.

As you can see, MSFT has largely gone nowhere recently, remaining in a trading range:



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Return to Rates

Fed Chair Bernanke will give a speech today, one week in advance of the FOMC’s decision on the direction of interest rates. Traders will be watching closely for any hints that may glean the future of fed policy.

Some big names are out this week too, namely Oracle, which will show whether or not tech spending remains robust. We are also on the heels of quarterly options expiration (last Friday) and it will be interesting to see how the market reacts this morning.

Once again, keep your eyes on the ten year bond, which managed to hold its break-out point and may be gearing up for another run (depending on the speech).



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Ten Year Bond Yield holds important support, while notching a “bullish harami” candle (on daily chart).

March Madness

Today the NCAA Basketball Tournament kicks off with the first round of 64 teams. After 12pm I believe it will be safe to assume that the market action will be lethargic as most traders will have more money riding on the games than stocks. At any rate, since the last post both the Dow and S&P 500 have broken out to new yearly highs, with the NASDAQ still range-bound.



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Indecision

The market is range bound. On any given day, one index may attempt a break higher, only to be pulled back by the others. There has been no follow through in either direction. This is frustrating to say the least.



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Bond Yield Blues

The bond market finally awoke from the dream that interest rates would stay put. Not only are rates moving higher, but bond yields have thus far eclipsed 2005’s levels and are on their way to the spring 2004 peak.

This latest revelation on the part of traders has created numerous complications. Among them:

-a stronger dollar
-weaker equities (most notably cyclicals)
-weaker commodities (gold, energy and base metals especially)
-weaker housing data



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Commodities break below moving average support.



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10 year Treasury Yield continues its break out to new annual highs.



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S&P 500 finds some buyers late yesterday. Will it be enough to stop the bond rout?

The Other One

President Bush signed a monumental nuclear energy agreement with India late last week, giving credence to India’s stature as the other burgeoning superpower in the world behind China.

The move was largely a hedge on our relationship with China, but also adds leverage to our position with Iran (as relations between Iran and India are quite strong).

Finally it enabled the U.S. to exclusively manage and regulate the nuclear industry in India, wresting control from the UN.

Maintaining a strategic relationship with India is clearly in our interests, irregardless of our position on China. India remains a top destination of outsourcing from U.S. firms, especially in the technology sector.

Curiously, the average annual income in India is about $3500, while representing the world’s largest middle class. At any rate, Indian stocks have done well over the past 3 years:



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The India Fund, Inc. is a closed end mutual fund that primarily invests in Indian Securities.

Project Origami

After being notably absent from the world of PC technology for almost 6 years now, Microsoft finally looks ready to throw their weight behind a new product, aptly titled “Project Origami.” You can see the video here:

"Project Origami"

It is a tablet style computer that is similar to a PDA. There is a detachable keyboard and it can also interface with a stylus.

While the company has remarked the video represents the gadget in its “form” only, Microsoft’s entry into any market will represent trouble for existing players—especially should they choose to leverage their brand and existing product portfolio to generate sales.



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Directionless since the bubble days, MSFT stock remains range bound.