Now they have risen
11/13/2003
So rates rose as expectedÂ…in Australia. Oh, and here too. What now? Which stocks will shift as a result. Are retailers going to have a stinking Christmas? I have been watching closely the interviews with shoppers on the effect it will have on them. I shall walk the streets (!) to see if shops are quieter than they were a week ago. Basically, we cannot tell yet what is going to happen in the mind of the consumer. Watch and see is not comfortable either. So I want to revert to my first choice: examining price chart momentum on key players.
Key players
With a large trade deficit, yet sterling rising with interest rates, making exports more expensive, and rising house prices, consumer debt, low growth, there is enough to worry about. So which stocks win?
Well, some of the performers breaking price resistance have included Hilton Group, Pearson, Dixons, SAB Miller, Allied Domeq, mmO2. Spot the Christmas theme with the last four.
The markets are looking for the next rate rise. Next month, or the month after? If the US raise then that makes a UK rise even greater.
None of this uncertainty helps volatility of course. It will be a tough old trading time in the run up to Christmas.
My take is that there will not be enough here to generally depress the FTSE 100 to year end. If anything the market may start seeing this as evidence that the experts see an economic recovery and so rates have risen is a good thing - perverse thing the markets no?
Small Caps
What if I then highlight some small caps with greater reward, albeit potentially more risk? After all, if we're going to have a tough time in the FTSE 100, then why not look where there is some real action.
Northgate Information Solutions has of course ballooned. Watch Corporate Services Group too for a couple of pennies higher. Isotron, Tops Estates is going skywards too. These are all momentum based plays, not value or growth. On value and growth, Hitachi Capital sticks out.
Other on momentum include the Evolution Group and Filtronic (there's a blast from the dot-com past).
There is certainly enough action out there to the upside, despite the rate rise.
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