Sunday, February 26, 2006

Just Whistling

By all accounts this new week should tell us the story of what the US economy is doing.  We like the news items that are coming out this week such as Monday’s New Home Sales for January and Tuesday’s Existing Home Sales for January as well as a couple of others.  We don’t believe the market is really paying attention to these or other warning signs that are flashing red.  

Our short term momentum indicator is at an overbought position and the market volume has decreased a bit over the past week.  Right now, we are staring the first of the month in the face and are wondering if the bulls have just one more little push left in them.  We are probably going to be selling into whatever strength develops, or at least you should be.  We probably will add to our short positions.

Last Friday’s report on the durable goods was disastrous, as one report called it, neither durable nor good.  With expectations of a drop, around 2.5%, the number certainly disappointed at Down 10.2%.  This report can be ignored, and the market did ignore it, but the sting is still there: The Economy is Not Doing as Well as We Hear.  Yes, the indicator does bounce around a bit but down that much is a strong down move.  The big question is will it bounce back next month?  That is what the market Expects based on its reaction to the news on Friday.  

The market seems to be whistling past the graveyard, so to speak, disregarding the things we are pointing out right now.  We don’t think there will be much in the way of upside follow thru even if we do get a little more upside this week.  The selling will commence very soon.  There are a few stocks that have shown some signs of fatigue and these market leaders are also telling you the story of a sell off coming.  Be careful out there…

Dow Industrials:  11,061.85  -7.37
RYVNX:  18.76
RYAIX:  22.04
TLT:  91.05
BEGBX:  13.04

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