There’s not a whole lot I need to add to thus: Richard Suttmeier performs a full diagnostic on the Technical Health of the Markets:
The Technical Dilemma
So far 2006 has been an interesting year for the US Capital Markets and in particular the major equity averages. The Russell 2000 Futures reached an all time high 787.75 on May 5, which was followed by the Dow Transports with an all time high of 5013 on May 10. Before this crescendo the Nasdaq saw a double top at 2375 in April. The small caps and transports failed to pull the Dow to a new all time high with a year to date high of 11,670 on May 10. The all time high of 11,750 was set in January 2000.
The peaks for the equity averages in early May were accompanied by highs for commodities; The CRB peaked at 365.40 on May 11. Comex gold hit $732.0 on May 12. Comex copper peaked at 404.00 on May 11. Nymex crude oil kept its momentum going to an all time high of $78.40 into July 14, as geopolitical risks continued, and as Hurricane season began.
I heard the bell ring at these highs beginning on May 10 when the Federal Open Market Committee (FOMC) raised the federal funds rate to 5%.
The Dow - Back in May the Dow was poised to breakout to a new all time high and could not, despite the record highs for the Russell 2000 Futures and Dow Transports. This makes a breakout for the Dow now, less likely, or not sustainable if it were to occur. The Dow had a double bottom in June and July at 10,700.
The Nasdaq – If the Dow goes to a new high keep in mind that the Nasdaq had that double top at 2375 in April. So your trading range looking at the Dow and the Nasdaq is major support for the Dow at 10,700 and major resistance for the Nasdaq at 2375.
Dow Utilities – Utilities set an all time high at 443.49 on September 1, and have been drifting lower since then, which is another reason for concern.
Dow Transports – Transports peaked on May 10 at 5013, and strength this week has been shy of its 200-day SMA at 4480. A close today below my semiannual pivot at 4442 is another reason for concern.
Russell 2000 Futures – The Russell 2000 Futures reached an all time high 787.75 on May 5. Today this measure of small caps is trading back and forth around my semiannual pivot at 736.11 with quarterly and monthly resistances at 754.49 and 790.58.
The Technicals: the equity averages looked better in May than they do today, and look what happened following that FOMC meeting on May 10.
This sets the stage for Wednesday at 2:15 PM.
The Technical Dilemma
Real Money, 9/15/2006 3:38 PM EDT
What do you think of the new Zune?
That question led to fascinating discussion about Microsoft on Thursday. What they do, how they work, brainstorm, etc. It also covered how Microsoft develops new products (notice I didn’t say innovate).
A few quick thoughts on the Zune: The coolest thing is its owners ability to zap songs back and forth via a Wi-Fi
connection — but those songs expire after "three plays or three days, whichever
comes first," which is kinda poor. The 3 inch screen versus the 2.5 inch on the iPod also looks pretty nice. Other than that, its not a particularly compelling piece of hardware.
Brown? How long til that gets cancelled?
We don’t know the price yet, but I expect it to be in the $249 – 349 range, and a function of how much MSFT is willing to lose/subsidize each unit.
What I found most fascinating about "This Week in Microsoft" were the 3 separate products that leaked out over the past few days:
• The Zune iPod challenger (in classic "steal the other guys thunder" following Apple’s event)
Let’s get a few things straight about Mister Softee. First, forget all the chatter coming from Redmond about innovation. They are now and have always been uttery shameless copycats. They do not innovate; They do not create cool products; They are boring code writing cubicle dwelling drones — and that’s what they should be.
The second thing you need to know about Microsoft: They print money like they were a branch of the U.S. Treasury Department.
That is the bottom line for investors, and the cash ain’t coming from all these other products attempting to recapture lighting in a bottle. Its Windows 1st, Office 2nd, and then a big 4 way tie for SQL, Hardware (mouses etc.) Server SW, and then everything else. All these other products — including Xbox, hotmail, MSN, etc. — are what happens when you have more money than God and still want to be one of the cool kids.
And, they’d probably get just as much criticism if they didn’t make all these attempts at imitating other successful innovators. Otherwise, they would just be a mature company milking their monopoly products until the next paradigm shift came along.
Understand my complaint about Redmond: I don’t begudge them these many attempts to stay relevant and hip, to keep pressing buttons until they find the next thing that works. Hey, after you become one of the most successful firms in the history of Capitalism, it becomes hard to repeat that performance every quarter.
I’m just tired of the bullshit about all their terrific innovations (Spare me the techno-babble about multithreading processors or dynamic ram usage).
To understand how Microsoft got to be the "innovator" it is today, you need to have some background into the psychology of its leadership. My favorite example comes via Robert Cringely
If there is a reason, it has to come from the competitive nature of Bill
Gates as Microsoft’s spiritual and ethical leader. Everything is a competition
to Bill, and every competition has a winner and a loser. Microsoft people have
always been encouraged to see the game, not the consequences, and to win the
game even if winning this way makes no sense.
Let me give an example of this behavior. In the early days of Microsoft, one
of the popular games was to see how late the boys could leave work for the
airport and still make their flights. These weren’t people who were habitually
late, they were playing a game. The eventual winner was Bill Gates, of course,
but to win he had to abandon his car [a new Porsche 911] at the departures curb.
Tht pretty much says it all. They are competitive to a fault — its in their DNA. Its also why they have been such a vast money machine. But please: Spare us the sanctimonious garbage about Microsoft the innovator, and keep the focus on Microsoft the moneymaker.
Here’s some more recent ideas out of the innovation factory: