Wednesday, March 22, 2006

Over Bought Again

Normally, after a day like Tuesday, the market would be down in the morning and then bounce a little for show and then drop into the close but not Wednesday.  On Wednesday, the market opened a bit down and then pretty much rallied all day.  There is pretty much no fear in the market and the bulls seem to be bold.  We talked about the volume on Tuesday’s reversal as being a little light for a key reversal and the bulls noticed it, too, or they didn’t and they just decided to buy the open, who really knows.  The point being that the volume on Wednesday was fairly light on a big up day for the Dow, up over 80 points.  

This reaction to Tuesday’s trading leaves us scratching our heads for Thursday.  Right now, it seems that anything goes.  We do see the potential for a cliff drop on the horizon due to this steady climb the Dow has been on but at the same time, we can’t seem to get anyone to get serious about selling.  

Right now the market is Over Bought and seems to be losing steam but it does seem to go up every day.  We must remind you that the NASDAQ Comp made a double top on Tuesday matching up almost to the penny with the January 11th high.  The 2333 level is now a ceiling of resistance that will be difficult to penetrate—again, not to say it won’t because it can.  As far as the Dow is concerned, it seems that there is a force pushing it up to try to get to the all time high just over 11,700 that occurred back in the year 2000.  Yes, that is six years of No change in the Dow.  And, the bulls continue to believe.  400 points may not seem like much but the Dow can’t go up all by itself for ever.  

The next two days bring us news on the housing and durable goods.  Thursday gives us the Existing Home Sales and Friday the Durable Goods Orders along with the New Home Sales.  Maybe the market won’t care about these numbers but the Wednesday Update certainly does.  This devil may care attitude about stocks will become a dangerous thing very soon.  We prefer the safety of being out and with funds paying around 4% on cash, this isn’t a bad time to be in cash.  Remember the Dow was at this level six years ago so 4% actually seems like a lot.

Be Careful out there…

Dow Industrials:  11,317.43  +81.96
RYVNX:   18.84
RYAIX:  22.12
TLT:  88.72
BEGBX:  13.04

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