Rev Shark:
No Time for Pessimism
12/20/04 7:43 AM ET
The believer is happy; the doubter is wise.
-- Hungarian proverb
As we head into the holidays and kick off the final two weeks of trading, there are plenty of good reasons to doubt the ability of this market to keep moving higher. The litany of bearish arguments is painfully familiar to market participants. High oil prices, a weak dollar, a mediocre economic recovery, high levels of optimism, inflationary pressures, high stock valuations and stretched technical conditions are some of the more obvious reasons to be doubtful about this market.
The chief economist of the International Council of Shopping Centers added another reason to worry, with comments over the weekend that retail traffic and sales were below expectations, especially at the mid- to low end. It doesn't take much digging or creativity to come up with reasons to worry about the future of this market.
Obviously, there are some very good fundamental reasons for substantial doubts about how much longer the powerful rally that started back in August can last. So should we sell everything, pack up the car and go hide out at grandma's house while we wait for the inevitable collapse to occur? Should we be taking some preventative action now so we don't get caught in the doom and gloom scenario that is sure to occur sooner or later? After all, isn't the only realistic view of the market right now a negative one?
Nah. This is no time for pessimism. We have to be vigilant and watch for all those worries and concerns to kick in as some inevitably will, but for the moment the bullish believers remain in control of this market. The optimists are in firm control, and the holiday season and the end of the year only add to the upward pressure on the market.
Don't underestimate the impact of the holiday season on the market. Thin trading around holidays generally favors the bulls. The bears seem to be inclined to step aside at holidays and let the bulls control the action. When you add in the inclination of many fund managers to want to close out the year on a positive note, we have a powerful brew for keeping the upside momentum going.
Although there is good reason to expect a strong finish to the year, there are some more immediate concerns to watch for. Weakness, particularly in big-cap technology stocks, last week has left some of them in vulnerable shape. Semiconductors are struggling and don't look likely to take on their traditional leadership role. Luckily the biotechnology group has been doing well, and looks like it is in good shape to take a leadership role.
Good news from Eyetech Pharmaceuticals (EYET:Nasdaq) this morning should help the group keep things moving to the upside.
We have some old fashioned Monday morning optimism to start the week. Positive comments about eBay (EBAY:Nasdaq) and Intel (INTC:Nasdaq) are keeping the mood positive. Overseas markets are higher on strength in drug stocks and merger and acquisition rumors.
Crude oil is down slightly this morning and the dollar is mixed. Leading economic indicators are due out this morning at 10 a.m. EST.
Gary B. Smith:
