• A main support for the rally was increasing risk appetite evident in a falling USD. Uncle Buck has been on a tear recently against EUR
• Decent corporate earnings have already been MORE than priced in. Case in point, check out Goldman’s record earnings, only to see its stock aggressively sold off
• China – the much talked about global engine for growth – is now on a tightening cycle. The People’s Bank of China is concerned about the country’s economy from overheating and has aggressively clamped down on credit expansion (much more effective than raising interest rates).
• Bullish investor sentiments are approaching levels last seen in 2007 – before the onset of the credit crisis
• Unemployment still getting worse with no speedy recovery in sight
• Team Obama-Volcker spells trouble for investment banks’ future profitability
• Uncle Ben’s reappointment is facing increasing uncertainty in Congress

From a technical analysis standpoint, pundits are talking about the major support for the S&P at 1078. In this view, the coming week will then be a do or die week for the US market. However in truth, these resistance and support lines are more of an art than science. Take it with a grain of salt and let’s see what happens.

A few quick things first though which I wanted to highlight. The first is the very, very easy way to follow this blog (or any blog). Just go to www.feedmyinbox.com, type in the site of the blog and your e-mail and voila! You get notified when posts go up. It’s not real-time (will only update once a day per RSS feed to avoid spamming your inbox on the more hyperactive blogs/news feeds), but it’s very handy. And before some wise guy tries to sign me up for some random site, there is a confirmation e-mail that gets sent out

Also, I’d very much encourage people to ask questions. The tougher the better really, since if we don’t get people picking at our ideas they don’t get fully developed. It’s always nice to get a fresh perspective because without it we can get caught in our own circular feedback loop. You think gold will rally? Sure, make a convincing argument. Think the semiconductor market is going to stagnate in 2010? I’d love to know what supports that view.

So, on to the updates. Because I’m planning on re-entering the VXX sometime around Christmas at a full 15% allocation, in reality I have a little over 7% cash not 22%. So if you’re wondering why that number is still high, there’s your reason. The main goal for me is to use that 7% to hedge as much as possible against some of my positions. So in that light, I’m looking at Nvidia.

Why Nvidia? A few reasons. Now before I go into it, I have not looked in-depth at its financials yet so if you have a concern on that end please bring it to my attention. It would help hugely since this next week isn’t exactly happy hour for pouring through 10-Ks. The real aim here though is to hedge against Intel. Now, I truly regret not buying both AMD and NVDA as hedges for Intel much earlier, but in hindsight there’s always opportunities avoided. At first my reasoning (for liking NVDA as a hedge) was that if Larrabee was panned Nvidia would benefit significantly since Intel gaining a foothold in the GPU market would have been devastating. I never imagined that Intel would actually scrap the project though, and that provided both AMD (which owns ATI) and Nvidia’s stock a jolt upwards.

The main problem as of now is what valuation to attach to it. There have been murmurings that one of the main reasons Intel scrapped its Larrabee project was to prepare for buying Nvidia (because of anti-trust concerns of Intel owning both brands vs. ATI). I don’t want to make a decision based entirely on nebulous takeover rumors, especially since its stock has surged 20% in the last month alone. But I’m not sure I can ignore it either. No matter how it’s diced if the deal goes through Intel’s stock will likely take a hit, either because they’ll have to raise equity and/or general opinion of large deals that “seem” to have synergy etched on its face is usually negative for the acquirer. Because the rumors are sketchy, if they fall through there shouldn’t be much, if any, impact on their shares.

That’s the first reason. The second reason is because the semiconductor market can be fairly rocky moving forward, with analyst projections of next year all over the map. One could argue that by buying Nvidia I’m actually increasing my exposure to that risk, but on the other hand they’re not entirely similar business models and have a different client base. I’m not convinced the reason which causes one to falter would necessarily impact the other in the same way. I’ll probably make a decision closer to the end of the month than now. If it does go in I’m dubious about putting a full 7% allocation in though.

Good luck with finals everyone!