Dow’s Up but Trades are Scarce, Worrying Bulls

While investors might be excited that the Dow is close to rising above 11,000 for the first time since 2006, technical analysts warn that there could be trouble on the horizon. Worrying the analysts is the low volume of trading activity. Usually, during a bull market, you see rising volume along with rising prices. AP with the story:

“It worries a lot of us,” says Wellington Shields’ Frank Gretz, a technical analyst who specializes in pinpointing market levels at which stocks might suddenly rise or fall. He wonders whether the volume signals that the rally could soon peter out, like the big surges that preceded steep declines in the 1930s in the U.S. and in Japan more recently.

Louise Yamada, a 29-year veteran of technical analysis who heads an eponymous firm in New York, says she’s not just concerned but confused.

“Why is the market going up?” she asks. “You usually don’t see advances without volume.”

Thoughts on Apple’s iPad

Although most analysts predict that the iPad will not add much to Apple’s bottom line for the fiscal year, most see the device evolving over the years into an important earnings source for the company. Here are some reasons why demand might pick up for the iPad in the coming years.

Videogames

Neil Young of iPhone game maker Ngmoco predicts that the iPad will attract gamers and reduce the time they spend on consoles and PCs. It is expected that iPad games will sell for significantly less than traditional console and PC games, further increasing demand. In addition, iPad will most certainly gain a dominant market share in the handheld gaming device market.

E-readers

Amazon.com Kindle’s e-reader has dominated the e-book reader market, but that seems like it is about to change. Priced at $259, most analysts agree that Amazon must cut its price to around $149 to prevent consumers from paying up for the full-featured iPad. The one downside for Apple is that the iPad’s screen brightness might make it harder for some people to read versus the Kindle.

Textbooks

Here is where I think there is huge potential for the iPad. If the iPad, or similar devices, are popular enough, many colleges might adopt e-textbooks. E-textbooks would definitely defeat traditional textbooks in the features department as many would be expected to have interactive graphics, video, etc.

Video

The attractiveness of the iPad’ screen could lead people to turn to it as a video-viewing device. Netflix might launch a free iPad application allowing its subscribers to access thousands of movies and TV shows.

Netbooks

Although current netbooks are cheaper than the iPad and have more features (i.e. Adobe Flash), the keyboard-free touchscreen of the iPad might convince buyers to move away from netbooks and towards touchscreen devices.

Bernstein Reasearch hardware analysts Toni Sacconaghi predicts Apple will sell 5 million units in the first 12 months. Sacconaghi doesn’t see the iPad contributing much to the bottom line in the short-term, but sees it picking up long-term. He expects iPad to add less than 2%, or 15 cents, to Apple’s earnings for fiscal year.

As for me, I’ll be waiting on the sidelines to get my iPad. Without multi-tasking or a webcam, it makes little sense to make the plunge now.

Jim Rogers: Gold Will Go Higher

In an interview with Bloomberg television, Jim Rogers stated that he believes commodities will continue their bull run in the coming years. Specifically, he stated that he expects gold to climb higher. Rogers hinted that institutional demand for gold is still weak, which could change in the coming years.

Rogers: “I spoke in Prague recently and we did a survey of the room and there were 300 major money managers from all over the world [and] 76% of them had never owned gold. Can you imagine that?”

Although we are short-term bearish on gold, due to the stagnant growth 0f money supply measure M2, we remain long-term bullish.

The Role of Short-Selling in Markets

In the chapter “Short Selling” in the 1935 edition of “The Securities Markets”, Wright G. Hoffman wrote:

One of the most essential functions of organized markets is to reflect the composite opinion of all competent interests. To admit only opinion looking to higher prices is to provide a one-sided market. To bring together an open expression of both long and short opinion is to provide a two-sided market and…a better reflection of prevailing conditions will be shown in the price structure (pp. 398-399).