When the coming week arrives, after all the stockpiling of basic necessities like water, batteries and
CDMA plays, Wall Streeters will drag themselves back to work and find their golden geese alive and well -- and flush with cash.
Liquidity, which barreled through December to help power the
Nasdaq Composite Index
through its second major milestone in two months, is expected to maintain its strength into early January.
"I see no reason to assume it's not," says Charles Biderman, president of
Trimtabs.com Investment Research
. "There will still be no new offerings, and it looks as if a lot of money drifted to the sidelines prior to year-end."
What's not entirely clear is where all that money is headed, and whether it will be enough to stave off profit-taking deferred for tax reasons.
"It will be interesting to see how the battle turns out between people taking profits and money flowing in," says Robert Dickey, managing director of technical analysis for
Dain Rauscher Wessels
in Minneapolis. "Will the money flow chase momentum, or will it go to value? And it seems like it's starting to look for value, which would be welcome to a lot of investors."
Momentum hasn't yet shown any signs of ebbing. But a lot of neglected sectors have been showing some life in the midst of all the
Nasdaq 4000 hoopla.
Dow Jones Utility Index
, for example, is up 5.1% since Dec. 13. Since Nov. 29, the
Morgan Stanley Cyclical Index
has tacked on a very respectable 10.7%. And the
Philadelphia Stock Exchange Forest & Paper Product Index
has been even more impressive, adding 17.2% in that same period.
"I'd expect to see the broadening of the market continue," says Dickey. "We're starting to see much better action in cyclicals and industrials like paper, aluminum, steel -- even financials are perking up here. There's a good possibility that we'll see that money go elsewhere. I mean, where do you look for bargains?"
A more difficult question: Who looks for bargains? Whether the market starts rotating into value stocks could depend more on the confidence of value investors than on the conversion of momentum investors. The momentum crowd's prolonged exposure to exponential gains could make it more likely to move into cash -- or at least into different technology subgroups -- at the first sign of weakness in the market's leadership. Right now, the market just hasn't decided that value matters.
That could change soon. Fourth-quarter earnings season starts in a couple of weeks. And next week's
could turn investors' attention toward the Feb. 2
Federal Open Market Committee
meeting, which conventional wisdom holds will yield a 25-basis-point hike in interest rates.
"Even though most are expecting
a hike, the reality may be worse than the expectation," surmises Barry Hyman, chief market strategist at
Ehrenkrantz King Nussbaum
. "There are still valuation models, and the correction that will come on will be a valuation correction. This last run-up has been driven by speculation and momentum, because we haven't had a
fiscal quarter to look back on."
The jobs report will come out Friday. The week's only other major economic number is Monday's
National Association of Purchasing Management's