Monday, May 29, 2006

This Week: A Good Time to Sell

After the long holiday weekend, the market is ready to start trading in a short week.  The short week contains the start of a new month and with that we know we get to see the job’s report and quite a few other important reports.  We don’t mention many of these reports in the Update due to the relative low market moving potential of some of them.  But, we know the job’s report is normally a big deal for the market and this month is no exception.

Looking at the technical situation presented by the market over the past week, we see that the SP500 managed a pretty good bounce right around its 200 day SMA.  This type of bounce is pretty much technical in nature meaning that program buying is responsible for the bounce.  The huge volume (record daily volume) in the SPY (Spiders—SP500 ETF) and the QQQQ’s (NASDAQ 100—ETF) attests to the technical nature of the bounce.  These vehicles allow for fast exposure to the market.

Friday’s market was pretty dull and biased to the upside given there was no one around.  Light volume was the order of the day and not much of note happened for us to report.  Yes, the bounce continued but on extremely light volume.

That bounce has now reached the price levels we mentioned in the last post, at least for the Dow.  The 11,275 to 11,350 range remains the target bounce area and we see some resistance now that we have reached that level.  We will comment more in the next post about the potential significance of this area of resistance.  With bullishness coming back on line in the US very quickly, we see this bounce as almost terminal, if it wasn’t for the bulls’ hope for “bad” economic numbers.  You remember, the Fed will have to be tough if the economy starts to pick up.  Ok…

Seriously, the market is in the strong part of the month and we recommend selling any strength that develops this week.  The best time to sell your stocks is when they have an early morning advance so, if you see that, you may want to take advantage of it.  This makes it difficult to know when to sell your mutual funds due to the one time a day that can be used to sell/buy.  Hopefully, you have been out for this recent decline.  If not, that decline was the warning shot to let you know that the up move is now Over.  Please do not leave much on the table going into next week.

Barron’s cover story this week is “Second-Home Glut” with a summary of “With vacation homes flooding the market, sellers are cutting asking prices by up to 40%...”  The big drag is the sudden pop in inventory.  With homes coming on the market so fast that buyers are being able to be choosy.  The real estate market continues to deflate.

Be careful out there…

Dow Industrials:  11,278.61 +67.56
RYVNX:   20.76
RYAIX:  23.32
TLT:  84.21
BEGBX:  13.54

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