Tuesday, November 14, 2006

Microsoft to Apple: Watch Your Back

Market action today is weird. Volatility is a tad higher than yesterday, especially with the mixed economic data picture. But this was expected so nothing strange there. However, after trading around the flat line for most of the session, the indices suddenly spike up sometime around 2.30 pm ET.

Some observers put this down to market-friendly “fed speak”, following some comments by an active voting member of the Federal Reserve that suggests the fed will not be raising the funds rate anytime soon. Others note that it is “technical” action by the S&P that drove the buying frenzy.

The S&P broke through a resistance – or ceiling - around the 1390 level after several attempts, which means it is now likely to trade above this level going forward. This reportedly prompts heavy buying activity of S&P futures in the futures market, which rubs off on investors with money to burn.

The truth is probably somewhere in between the fed speak and the technical action though the latter seems more plausible to me since fed speak is now too common to have such an effect on the market. Nevertheless, the S&P will need to trade above 1390 for a couple of sessions to give the breakthrough some credibility and stamina.

Needless to say, the Dow and the Nasdaq both post ample gains in sympathy with the S&P. Volume is also high, so a lot more buyers than usual register their bullishness.

The Zune is here. MSFT’s “iPod killer” hit the stores today. Seriously, with Apple’s (AAPL) 75% market share and a five-year head start, inter alia, MSFT has its work cut out. However, despite being late to the party as usual I would not count Mr. Softee out. It destroyed Netscape when it came out with Explorer (Internet Explorer) and it has been giving Sony’s PlayStation a run for its money with the 360 (Xbox) video game console.

How would I know when the Zune starts to get on AAPL’s nerves in this MP3 battle? When AAPL starts to talk increasingly about how bad a job of catching up to the iPod the Zune is doing. Right now AAPL is not saying much because it doesn’t view the Zune as a threat.

No comments: