A start with a BANG

The stock markets started 2006 with a really big bang! All major indexes up more than 1%, with most up more than 1.5%. A sleepy start transformed into a solid cheer after the Fed meeting minutes were released and seemed to make clear that the central bank's 18-month campaign to raise interest rates will happen sooner rather than later, the markets went rampant. It was as though the market was waiting for some positive news to celebrate the New Year.

So should we open up the champagne bottles? We would be tempted to do that. If on the first day the markets jump more than 1.5% we are really looking for big gains for the year, isn't it?. Why not jump in with everything we have? Right! Are you kidding? Today is just the first day of the year. And more than anything I feel it may be a trap. Well, the feds policies have been predicted by many. And I would say they were anticipated and reflected in the markets already. So what was this enthusiasm about? I really don't know.

Maybe people got a little bit excited about Google's $600 price target by Piper Jaffray analyst Safa Rashtchy. Maybe they cheered about some rumour about a possible tie-up between Microsoft and Yahoo. Or maybe they just wanted to celebrate, a bit of a hangover after the holidays! Hey, but you need to wait. Google's price target is for the end of the year and there are 4 earnings calls inbetween. Last quarter earnings season is just round the corner and so is, historically, a weak period for the techs. And yes although there is nothing coming out yet to say things may be bad, I feel one should wait nevertheless. Visibility is good, impatience is bad. You have a whole year in front to use your discretion. And by the way this rally happened on the face of oil jumping more than $2 a barrel. I feel something is fishy around.

According to the Stock Traders Almanac, the last 35 times the first five days of January have been positive on the S&P 500, the index posted full-year gains 86% of those times. Let us see what the next 4 days have in plate for us.

So although I cheer today's BANG I will be watching for a THUD at least for a couple of weeks. If the market can maintain it's positive bias few weeks into the earnings season then I would change my bear stance. Let us see how long does the Bulls hangover last!