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January 17, 2007

Disconnected

It never ceases to amaze me how people refuse to draw lines between data points that are directly in front of them. A case-in-point is the perversion of AMD's warning last week with regard to Intel, described here in a couple of posts. As you saw, Intel shares were punched for about 6%, and if one reads between the lines of statements from their CFO, a strong case can be made that Intel will issue a warning before their next release.

Likewise, an article posted on CNN this morning (see the link on my home page), detailed a report from RealtyTrac showing that foreclosure rates in December were up 35% from December '05. Naturally, the trend is not good news if you are bottom-calling the housing market. How did the homeys respond? Up one percent today. Centex, which blew its earnings report yesterday, popped 2.3%.

Tonight we hear reports from Apple and Lam Research. The former has the potential to set the tone for tomorrow's trading, so I will be paying close attention to their guidance and how the market responds. Given that iPods were more or less Gorilla-glued to retail counters during Christmas and that they litter vending machines throughout local malls, I suspect Apple will be disappointing in one of the next two quarters. However, I decided not to fight the enthusiasm behind the iPhone and stayed neutral this go-round.

The PPI came in slightly stronger-than-expected this morning, but the news did not seem to shake things up too much. Precious metals were a percent or more higher, but this move could be an oversold bounce as much as anything else. In any case, the CPI tends to draw more attention, and we'll receive that number early tomorrow.

Disclosure: Long INTC, LRCX Puts

 

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