Wednesday, October 18, 2006


Sector Spotlight: Software

Despite weakness in the Semi's, the market, led by IBM, is blasting off to new high's. With the DOW over 12,000, investors seem to be playing the momentum game, bidding up everything high multiple.

I am a little surprised that the market is ignoring obvious fundamental weakness in the Semi's and MOT. You would think, if the Semi's and MOT are weak, maybe the consumer is sucking wind right about now. Apparently, the buyers just want to buy and, once again, the sellers want to buy.

So, what we have is a runaway train with nothing but a few weak bears to stop it. The CPI data was benign, earnings (so far) were weak, but so what.

Until the buyers exhaust themselves, the market will continue moving higher.

As for Software stocks:

Aside from the Networkers, I really like software. I own ADBE, ORCL, CTXS, SYMC and MANH. Moreover, in light of strong numbers from ORCL and IBM, I feel confident that CTXS will have a good earnings report tonight. Normally, I try to avoid earnings plays; but I have a good feeling about CTXS-- due to report tonight.

Bottom line: Despite weaker-than-expected earnings, the market wants to go higher. So, for now, I will hang on to my longs and make offerings to the stock God's to limit the upside of my only short, ATHR. Within the market, I like the Networkers and Software and would buy those sectors, aggressively, on a modest pullback.

NOTE: Considering we broke through 12,000, it wouldn't surprise me if the sellers try to bring the market down-- because they need to. So, beware of the bear today.

The following Software stocks have mojo:

TTWO +4%
ATAR+ 4%
CSPI +3.2%
CTXS +2.7%
TIBX +2.5%
BEAS +2.5%
IGTE +2.3%
RHAT +2%

Good analogy, the runaway train.

Big Oil, Goldman-Sachs, and the Bush Administration dealing card games in the club car, the engineer coked up, and the brakeman took a powder.
I love that paragraph!

Do you mind if I use it to describe the market?
Use it in good health.
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