Tuesday, January 23, 2007

Not stepping in yet

A little dead-cat bounce perhaps after some brutally down days, and crushing weakness in the techs. I think we will see a day or two of strength here after some ostensibly encouraging earnings reports (TXN). However I'm not yet ready to buy with any conviction. I'm opening a new position in DNA as my healthcare play of choice, since I think biotech will get a lot of attention in 2007, and it's a great story. DNA has been executing but has had a lid on it due to fears about the new Democratic congress, and general outperformance in tech. Now that tech is weaker, this money's got to go somewhere. I think it'll be biotech.

In metals, RIO is doing extremely well today and looks strong going forward. I sidelined RIO a bit too early and have missed a nice upside move. Since RIO is one of the only things solidly working in this market, I will look to reopen when it comes in.

Lastly, YHOO reports after the close today. They have rolled out the new Panama advertising system to about 30% of their advertisers, to generally positive reviews. They should have enough data to give meaningful guidance for 2007, and I think Semel will raise it. Switching to a more rational pricing system is an obvious change, and they should have strong indications of how it will perform. Even if Semel does not raise guidance here, I think the downside is limited. Most everyone thinks that Yahoo can't execute at all and the pessimism is rampant. Tepid numbers would not harm the stock too much.

Overall though, I am not stepping firmly into this market just yet. I think there is quite a bit of downside through the bleak days of February, especially if a rate cut gets taken firmly off the table.

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