Tuesday, February 21, 2006

Down Start to the Week

The stock market retreated on Tuesday after a day off on Monday for President’s Day.  The sell off was not particularly significant except that it did happen on the first trading day of the week.  Looking at the technical position, there are several interpretations that are possible.  One of them is that the major indexes are pulling back for a test of last week’s lows in order to gather some steam and then push ahead.  This is not our preferred reading but one that does have some merit at the moment.  There are signs that the recent rally attempt by the Dow to make new highs, while successful, left the broader market lagging and showing a glaring non-confirmation.

At this moment we can’t be sure of the course of the market near term.  There are just too many possibilities.  We are watching carefully for another good selling point.  We are already on the short side of the market with our funds along with some bonds but we may readjust our positions or add to them if the opportunity presents itself.  Tonight we wait.

The LEI were strong for January at a plus 1.1%.  The market didn’t really pay much attention to them but did slide in the Southerly direction for most of the morning after a brave start to the day on the upside.  The rest of the day was spent moving mostly sideways into the close.

Wednesday we get to hear about the CPI and how it faired for January.  After last week’s PPI number pushing above estimates, we could see some higher numbers for CPI as well.  We still don’t think the number will have much bearing on the stock market.  As a reminder the inverted yield curve is still fully entrenched.  Meanwhile the Fed is worried about inflation and will most likely raise rates at the end of March at the new Chairman’s first meeting.

Be careful out there, any upside will not be worth playing, just selling.

Dow Industrials:  11,069.06  -46.26
RYVNX:  19.22
RYAIX:  22.31
TLT:  90.80
BEGBX:  13.06

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