Positive Stance Maintained

As suggested previously, the market should be and is maintaining its positive stance in this busy-for-earnings week and ahead of the Fed meeting next week. The bulls seem bent on keeping the SPX above its support levels of 1175 and 1160 for a late 4Q rally. For me, the 1205 level in the SPX Index is the "make-or-break" spot about the infamous 4Q rally that many people have called for (and burned themselves in the process being long;-). Above 1205, I think the rally is happening (and we may even exceed yearly highs in the process); below it, er.. not really. Paradoxically, I think we would actually need the oil sector to stabilize before we rally, unless of course, the technology sector wakes up and leads us higher, as I have described in previous postings.

Overall, earnings haven't been disappointing at all, and there are some incredible gems of companies out there, which are firing on all cylinders. For example, GOOG absolutely blew away all expectations out there, and is now worth more (as measured by its market capitalization) than EBAY and YHOO taken together (who would have thought that a year ago)? They are riding the surging wave of online advertising, and the 4Q being a seasonably very strong one because of all the holidays, it is reasonable to expect a continued strong growth there, especially since GOOG's management execution seems flawless so far. In addition, one can also make the argument that with high gas prices crippling travelling over the winter period, more and more people may be using the internet to surf and search, and do their holiday shopping "remotely" -- all things that should favor the behemoths in the sector: YHOO and especially GOOG. GOOG looks to me better positioned overall, given their dominance internationally as well; however they may also be more expensive (and for a good reason!). I am also worried about their cost structure management -- GOOG has been hiring people left and right, and while their integration so far has been excellent, there may be unavoidable speed bumps in the future: the pace of growth of this company just seems too dazzling too fast for it not to run into some problems eventually. YHOO on the other hand seems almost like a "value"-type of investment by comparison. They too had great earnings last week, and are executing their strategy reasonably well. Investors with lower risk tolerance (I never thought I would write this regarding any internet stock, let alone YHOO), might prefer to buy that latter name instead of GOOG. Either way, GOOG and YHOO should continue to do well over the forthcoming holiday periods.

I am hearing some chatter about Bush nominating Greenspan's successor this week. If this is true (even if most plugged-in observers seem to think it's Big Ben Bernanke!), we might see some more volatility ahead of us, even without the pending earnings announcements. Consequently, the VIX should continue to stay well above the 14 level (see my previous posting about what that means). Get ready for some rollercoaster action!