Thursday, July 26, 2007

An Interesting Day, to Say the Least

Second biggest drop of the year for the Dow, and at one point, it was down 450. We need to watch early trading tomorrow. If we head sharply early, it would be very negative. I anticipate somewhat of a bounce back up tomorrow, how much remains to be seen. Let's take a look at the damage.

-Financials are getting flat beaten. We've seen this throughout the past couple of months. The reason for this fear is because of the financials. But as Buffett says, be "fearful when others are greedy, and be greedy when others are fearful." I think its time to start looking at some financials. I like Bank of America (BAC) especially with its increased dividend. Goldman Sachs (GS) got worked pretty good today. They are still the pinnacle as far as financials are concerned.

-Oil stocks retreated. It all started with negative profit news from Exxon (XOM), which is the king of the diversified oil companies. Refiners are performing horribly in the past week. I like drillers still, especially on the back of the Transocean(RIG)-Global SantaFe(GSF) deal. I think that no matter how the price of crude fluctuates, these companies are well positioned, as they are working with not only American oil companies, but other growing nations, including China. I obviously still like Noble (NE) which I have since my call to buy it in May.

-Tech stocks, believe it or not, have become where investors are moving their money. Apple (AAPL) performed tremendously when the market tanked. They've just got so much strength right now. They did guide down a bit for this coming quarter, but their sales of iphone, ipod, and mac are on fire. Baidu (BIDU), which is the Chinese search engine, is also a hot tech name. As anyone who reads my blogs knows, I've never been huge on tech. They are always fetching a premium and trade very volatile. This is why traders love them, but main street investors should be careful.

-Tomorrow is going to be very interesting. Are investors going to be fearful about holding positions over the weekend and liquidate? Are investors going to view this drop as a buying opportunity as they did in late February? I don't think that people are viewing this drop as more meaningful of an event. They are realizing the dangers of credit coming more expensive, and the risk of M&A activity drying up.

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