Tech stocks and banks

(21 Jan) The markets did their own variation of the "Little Engine that Could" on Wednesday.

After spending the first few hours huffing and puffing and not really going anywhere, just before mid-day, traction was finally made and off we went. The markets were able to gain back almost all that they lost on Tuesday.

The techs

Looks as if the tech folks didn't have the Grinch come to see them at the end of last year. IBM showed a 12% gain for the last quarter and is looking for a pretty good year this year. Since it's part of the Dow Jones and about every other major large stock index, when they go up - everybody gets to go up too.

Apple put up record profits and revs for its first quarter. Apparently, people are buying the beejeezus out of IPhones, IPods and the Macs. Whatever. The traders assume that if some of these guys seem to be doing well, then a bunch of the others are likely going to do well too, so let's buy them...

As for the banks

Well, it's interesting to me that the CEOs of two of the banks in the news of late decided that it was a fine idea to go out and buy some of their own stock. The BankAmerica CEO shelled out for 200,000 for his own account with 5 directors each taking personal positions as well. On the other hand, the CEO of JP Morgan picked up 500,000 of his shares. The latter to me is much more meaningful.. Not just cuz the numbers of shares are more - it's also that the JPMorgan stock is over three times more expensive... On e move for show - the other, for dough.

A couple other banks reported profits for the fourth quarter and the year, respectively. That gave the traders all warm fuzzies so that sector did an about march today with the banks being up double-digits across the board.

Let's not forget the short sellers

Not a little of the fuel for this bounce came as people had sold short a number of these issues on the hope that they would continue to crater. Well, imagine their chagrin when they saw these positions going against them - big time. They came racing in to buy at whatever the price was so they didn't get crushed.

Buyers and short-covering is generally a great combination for moving higher.

The moral of the past two days

Well, I don't know about moral exactly but it's something to keep well in mind, in any case. One day does not a trend make. The markets will always - always - change day-to-day. To try to anticipate them is to try to catch mercury in your hands.

The only things you can count on getting from reacting to the daily market moves are (1) a lifetime requirement for a Maalox drip and (2) a personalized neck brace as a result of all the upping and downing you'll endure.

Invest in quality. Give it time. Don't listen to the news.