End of Week One

Yesterday capped off a great week for the market, but a mediocre one for our Buy List. Don’t get me wrong; I’m pleased with the market’s performance, but I’m a little suspicious of so much strength in tech, energy and gold. Bear in mind that those sectors can move quickly, but I’d much rather see “core” areas like finance and consumer stocks lead the way. That’s the foundation of a lasting rally.
Yesterday, the S&P 500 was up 0.94% to another four-year high. Our Buy List gained 0.55%. So far, 2006 is looking very good. The S&P’s return this week, not including dividends, is roughly equal to what it did for all of 2005. For the week, the S&P gained 2.98% and our Buy List was up 1.54%. I’m not ready to panic just yet. The returns for the week were pretty uneven. Many tech and energy indexes were up over 6%.
On our Buy List yesterday, AFLAC (AFL), of all stocks, had a good day. The insurer gained over 3.5% thanks to a bullish report from Deutsche Bank. However, our other insurance stock, Brown & Brown (BRO), had a weak day. Respironics (RESP) was also weak due to a downgrade from Harris Nesbitt. The earnings reports for the fourth-quarter will start coming out in about two weeks. On Monday, Alcoa will report its earnings. This will be the first Dow component to report for the fourth quarter.
Yesterday, the Dow was finally able to break through the Fibonacci number of 10940 as it closed at 10959. I’m not a fan of technical analysis, but I have to concede that the market loves to toy around with these benchmarks. For example, the Russell 2000 (^RUT) broke out to a new all-time high yesterday. The index was briefly over 700, but it closed at 699.39. I don’t think that’s purely by chance. The Russell 2000 has been creaming the S&P 500 for nearly seven years now. Since April 8, 1999, the Russell 2000 has gained nearly 75%, while the S&P 500 is down 4%.

Posted by on January 7th, 2006 at 4:05 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.