Has Microsoft Lost the Battle Against Linux?

The market continues its reluctant “correction”. I say reluctant because it barely changes from yesterday’s close. This is hardly surprising, since investors typically hold fire before payroll numbers emerge on the first Friday of each month.

I think a conundrum that worries investors has emerged. Economic indicators continue to point to a slowing economy and rising inflationary pressures, albeit tempered, at the same time. So Wall Street can’t seem to ascertain whether the Fed’s first move from the current “do nothing” stance will be to raise interest rates to curb inflation or cut rates to prevent a recession.

That’s why an important indicator like payroll numbers, or the number of jobs created by companies, has taken center stage in the mind of Wall Street over the past few days. If the number of jobs created in October falls way below the consensus of 123,000, which to me seems like a huge leap from the 51,000 created in September, the market may sell off.

Companies often ramp up hiring in October through December, but aren’t many of these jobs part-time retail positions created to deal with holiday season spending or to cover workers that plan to go on extended leaves? Anyway, tomorrow can’t come soon enough for Wall Street.

I’ve never used Linux - the open-source operating system developed by Novell – but it must be giving MSFT a run for its money as the software giant surprises the market with an “interoperability” – I know it’s a mouthful – agreement with Novell. MSFT says in a conference that the two firms will still compete but co-operate in the best interests of “customers”.

I think this is a tactical move for MSFT, after all Linux, and open-source software in general, has been gaining popularity with consumers and grabbing market share from Windows. So how do you stop an adversary’s advance on your turf? Make him your friend!

Meanwhile I was caught off guard by EBAY’s 3.5% run-up today. I can’t seem to find any news behind this drive so the impetus appears to be that the stock has broken through a key resistance level of $32. From a technical analysis standpoint once a stock breaks through a resistance after several tries, it often finds support around this price, i.e., the resistance now becomes a floor price. EBAY has tested $32 over the past week so it is likely to find support around this price going forward.

For added support EBAY’s 5-day moving average (MA), which crossed the 10-day MA to the upside on October 19th, has trended above the 10-day since. When shorter MAs cross longer ones to the upside, a stock’s upward mobility is more credible.