Here’s What Really Worries Me

Nothing has changed since

my last report.  I will not bore you with sentiment today except to say
it keeps getting worse and worse.  Everyone expects higher prices…hmmm!

I told you to expect a pause in the move up…and that’s exactly what we are
getting. I also told you to take the foot off the pedal. I want you to continue
to ease up as I believe there may be more work consolidating recent gains. I say
this because I am starting to see deterioration in big-cap land…which could
hold the major indices back. By way of example,
(
GE |
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50-day average…
(
DELL |
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(
CSCO |
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recent breakout…while
(
BSC |
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(
LM |
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(
LEH |
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other BROKERS like
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MER |
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(
MWD |
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My other issue right now is that a bunch of under-$10 stocks are acting well.
That’s great for those stocks but I am not so sure it is a long-term positive
for the market. Excessive speculation only a couple of months off of a 6 year
low in the NYSE does not excite me.

If there is anything that is REALLY starting to
worry me, it is the DOLLAR. As you know, I listen
to everything, I read everything and I watch what people are saying. I cannot
find more than a handful of people that are worried about the dollar’s plunge.
All the bulls say it is a positive because it will help our economy. I have news
for them. Maybe our multinationals will profit because of the lower dollar, but
what happens if the rest of the world falls into a recession?  I am just
amazed that no one cares that OUR dollar may be in
the throes of a longer-term drop.

But…the market remains in good technical shape. 
ALL major indices remain above their short, intermediate and longer-term
moving averages. NEW HIGHS continue to outpace NEW LOWS by a wide margin (though
many non-operating companies pervade the list) and GROUPS in positive shape
continue to swamp the ones in poor shape. With so many bases forming, I just
don’t see a market that can crumble from here…but a continued pullback could
be in the offing.  So, while I don’t see much upside, I am not so sure there is
a lot of downside here either.

Individual group notes:

HOMEBUILDERS are going nuts to the upside. It felt like a short-covering squeeze
late in the week. I would not be buying here with most very extended.

BIOTECHS have been strong but I am now starting to see excessive speculation in
the BIOCRAPS. Yes, the under $5 names with no revenues and no possibility of a
drug for 5 years are moving up…indicating the late stages of a move.

UTILITIES are breaking out all over the place on the back of the dividend tax
cut. Careful about getting in too late. Just look for the breakouts.

SEMIS are becoming negative…so be careful. Names like
(
AMAT |
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MXIM |
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are acting horrid.