What is the Market Thinking?
For the past few weeks we have been having a tremendous run. IMO, it was well justified and desrved. We were way too oversold in August, and the by the Fed holding steady, it told many many investors that the markets were very undervalued.
The stampeed upward only saw minor corrections to the daily 20 SMA. Now, fundamentally speaking i think the markets are just fine… a little on the high side, but nothing to get nervous about unless some horrible event occurs shifting the fundamentals of the economy. BUT, techincally speaking, I think the markets are very overbought.
We are in need of a pull back, and I think we will get one soon. The most of the market catalysts have been used up (ie Strong Earnings, Fed holding and good economic data) that can sustain a decent rally. The only decent catalyst left is MSFT (more importantly Vista).
If the markets keep rising after the MSFT report, keep a strong eye on PC makers. By the markets reaction to MSFT’s report, the market will be telling whether or not a PC cycle is in the works. A juiced up PC cycle can cause the NAZ to keep its momentum.
IMO, looking at INTC’s chart, the recent PC cycle ended in the begining of 2004. So we are about 3 year from a new one, which is about right for a new cycle to begin. (Cycles usually last 3-5yrs) Now with Vista coming out, this may be justification for a new cycle to begin. If this is the case look to HPQ, INTC, AMD and maybe DELL. But this should be enough to sustain the Naz. It should also be enough to potentially cause a short squeeze, especially since the Naz is currently heavily shorted. (article… thanks drtkw for the link)
All and all i think the market should correct soon, but a major catalyst still exists… so shorts becareful or u will become ur worst enemy by squeezing each other.
