DJIM #48 2007

In typical Friday fashion, we were exposed to quite a bit of profit taking, except in this case it was probably more justified after the rally and another early move up Friday. The market ran on interest rate fever and now most likely it will trade sideways and consolidate till the FOMC decision on December 11th.  The FED will be watching the numbers closely this week and traders will be doing the same, some will position themselves for that date and others will just sit on the sidelines.  In our case, even though we think the bias is up, we will be picky and look for a few set ups and pockets of strength.  Possibly position in on some dips on some favorites.  Seems a few downgrades are making the rounds and you start to wonder if the firms might want to get some cheaper (eg RIMM downgraded a 2nd time in as many days).  The pockets could and usually are a sector, but with the gains last week in our 3 most closely followed (Solars, China, Shippers)we are not expecting great follow through on them.  The pockets this week could also be the big financials like GS, MER which are acting like daytrading stocks in this environment and also the interest rate sensitive group.   It could also be oil stocks if the prospects for the winter are any indication by what some are seeing of a long cold winter.  This would also most likely help the Solars.  So be patient this week, as we say the indices don't go straight down, but they also don't go straight up.  If the market did continue to rally this week, we'd be very concerned of a sell off on the FOMC decision no matter what it would be.   A week of sideways action might just be the best medicine.

Just like the good old days, there is some M&A activity for a Monday morning instead of the usual sub prime headlines. Unfortunately, it might have little affect on the the mood of the market early this week, it is probably better to get your XMAS shopping out of the way this week and get ready for pre-xmas trading...we'll see.  What we don't want under our trees is more negative headlines from the subprime debacle to kick the legs out from the market after the recovery last week.  Be patient, be selective...a stock like MELI might be a ticket, it surpisingly didn't particiapte to some degree in the retail/online push from last week, but this weekend was a feature in IBD.