You can't argue that this rally isn't impressive. Well, the perma-bears will continue to do so, as they always do, but the rest of us can call it like it is. And isn't this rally impressive -- especially in tech?
Earnings growth was impressive last quarter, even if guidance wasn't, but that guidance wasn't punished. So now the market is looking out into next quarter and seeing that the bar has been set awfully low. And that means the market thinks multiples can expand a bit. For now, it's a virtuous cycle taking stocks higher.
If that's one of the underlying reasons for this extended rally, then at some point, that near-term confidence relative to guidance will get priced in. Then the cycle would turn vicious, even if to just "digest" those gains.
Same as it ever was: The near term is so much about trying to game those nuances. I didn't buy the puts that I mentioned this morning, but I did roll some exposure off the table as noted earlier.
Hope you had a great day.
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Cody Willard Blog Rolling Up My Calls 11/20/2006 12:24 PM EST Slightly out-of-the-money calls work for News Corp., Microsoft and Cisco.
Cody Willard Blog Score One Against Bubble Talk 11/20/2006 9:13 AM EST Bulls outnumbered bears in the special blog poll.
Cody Willard is the manager of a hedge fund and a contributor to the Financial Times and VON Magazine. He is also a regular guest on CNBC's Kudlow & Company and an adjunct professor at Seton Hall.
He earned a bachelor's degree in economics at the University of New Mexico.
Willard appreciates your feedback -- click here to send him an email.
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