Tuesday, March 14, 2006

The Ides of March is Upon Us

There are several items to discuss so let’s get to it.  Tuesday brought an enthusiastic market in reaction to several “interest rate” related items.  Late Monday we heard that the Tough Fed may not need to be so tough due to wage pressure not pushing up inflation.  The Fed is now getting ready to be cautious in the future to make sure they don’t overshoot on interest rates.  This happy talk along was instrumental in the up move on Tuesday.  

Add to that, the retail sales fell last month, pulled down by weak auto sales and lower gasoline receipts, lucky us.  The WSJ says that “economists say underlying sales remain relatively strong and they don’t believe consumer spending is slowing.”  But, here again, the bias is for the market to interpret this report as bullish due to a lid being slowly put on interest rates.  In contrast to these reports, we did see that oil has been up sharply in the past two days and that Goldman Sachs had blowout earnings to start the earnings season.  

GOOG was in the news again today, not that I want to mention why, just that it was in the news (go read about it yourself).  The news lathered up some buyers and pushed GOOG up several points, 14 to be exact, in Tuesday’s trading.  You know that GOOG has replaced GM as the market leader—ok, so it’s a little stretch but not much.  

For the Wednesday Update, there were some developments in the index watch.  Tuesday pushed up the Dow to a new recovery high and the SP 500 managed a new high as well.  These two blue chip indexes were the only ones that managed to go to new highs and we caution you to pay attention to this type of technical pattern.  The strongest index we have mentioned is the Russell 2000 (RUT) and it failed to achieve a new high on Tuesday.

The market is faced with some other news in the coming days.  This is an options expiration week, not a quad witch like next month but still a possible force in the market.  Thursday will give us the February CPI and Housing Starts and next week we see PPI, New Home Sales and Durable Goods Orders.  Then the following week we will see the Fed raise interest rates another 25 bps.  The market has managed to get through a lot of difficult news items but the cracks are beginning to show up.  We point to the particularly timid trading volumes and the non-confirmations from the broader indexes while the Dow sets new relative highs.  How are your stocks performing?

These are difficult times and we recommend caution on this “Ides of March”.  We are close to the inflection point so… Be careful out there…

Dow Industrials:  11,151.34  +75.32
RYVNX:   18.69
RYAIX:  22.03
TLT:  88.80
BEGBX:  12.98

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