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Keeping Your Eye on the Ball, and Japan, and Intel

In swirling markets like these, it's not Fed speeches and bonds that matter.

During the past several days, loud sighs of relief rumbled down Wall Street. An inflation scare has quieted thanks to a modest

Consumer Price Index

report and the flailing stock market seems to be getting its legs back under it again.

But in this pre-earnings season, it's important to pay attention. Though warnings don't always pound a stock (see

Compaq

(CPQ)

), negative surprises have a way of jumping up at just about this time, shaking the bull market's confidence. While the economy continues to hum, experts are picking through the stock market, looking for some signal about the road ahead. We've raced so strong for so long that many people approach their trading day with one foot close to the exit, happy to be in the game but always ready to get out if things turn nasty.

What's remarkable is how the stock market can provide surprising tells even in a time of great information flow. Take a look at Tokyo. The doomsayers continued to rail against the prospects of Japan throughout the first half of the year, even as the stock market started heading higher. The chorus of criticism had grown so strong, that the punditry took great pains to scoff at the rally in stock prices. Then, lo and behold, the economy comes in with a stunningly strong performance and suddenly the move in stock prices doesn't look so surprising anymore. Will it stick? Who knows, but take the Japanese events as a lesson. The stocks were trying to tell us something, but the sage watchers weren't listening.

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Closer to home, one of the great market tells is behaving badly.

Intel

(INTC) - Get Intel Corporation (INTC) Report

, the chip giant that plays a role in just about everything important, has steadily drooped since clipping above 70 in late January. More recently, even as investors have started getting a little skip back in their beat, Intel has backed away from a half-hearted rally attempt. Since Wednesday Intel has dropped 10%. This while everyone is hailing

Greenspan

and the rebounding bond market.

So what to make of all this? Is Intel trying to tell us there's something ahead that might not be so agreeable? It's vital to focus on the things that matter in a swirling environment. For investors, that's more than arcane speeches and the resiliency of the bond market. Don't lose sight of Intel. It has rarely failed to offer good insight into the coming days and weeks.

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