Monday, June 12, 2006

Just Another Down Monday

The stock market disappointed the bulls once again on Monday as more selling dominated the late afternoon trading. The Dow made a new (relative) closing low and is trading near the February lows, down 850 points from its May high, right around 8% while the NASDAQ COMP is down almost 12%. I was informed today that the market isn’t in a bear market until the price drops 20% so we have a ways to go before we can declare that we’re in a bear market. To us, a 20% haircut to your portfolio is not what you need. And, while we don’t believe 20% will stop the bleeding this time, the market could be done going down just as it is being declared a bear market. Then you’d have to wait until the market went up 20% before you could really know it was a bull market. Not a very good way to go about it.

We were surprised by the lack of buyers on Monday. Late last week, it looked as if the market wanted to take a breather from the selling but Monday was a different story. The weakness in the broader market was masked by the relative strength of the Dow. With the Dow only being down 0.91%, the other indexes we follow were down more than that. The SP 500 was down 1.27%, the two NASDAQ indexes we follow, the Comp and the 100, were down about 2%, while the Russell 2000 was down over 2.5%. These are strong down numbers and leave the trap door in a precarious position.

The Dow and the SP 500 did manage Not to go under last Thursday’s intraday low but the NASDAQ Comp and NASDAQ 100 as well as the RUT (Russell 2000) did break below those key near term support levels. So, here we are with these indexes about to break out to the downside and…

Of course, in overnight trading the futures are up so there is apparently no fear again. The news during the trading day was that the Fed Head was going to be speaking on Monday evening and the market was nervous about what he might or might not say about the current boogie man, inflation, and what he might do to interest rates.

Well, in the next two days we will see what the inflation numbers, as brought to you by the Bureau of Labor and Statistics, a government sponsored bunch. We’ll just see what those numbers are and how they will affect the market in the coming days. It is clear that the market is weak, given its response to the modest buying opportunity that developed over the past few days.

The only real bullish opportunity will come, as a flash in the pan, as the Fed decides to stop raising rates. That news will get the juices flowing on the upside for a while until the dollar gets crunched on the news. At that time will be getting ready to move some funds into the mining stocks or funds. Today the HUI dropped a bunch but did hold last week’s lows. PAAS closed in the 16’s so we are getting ready. There is still some excess yet to be wrung out of the mining/precious metal group but we are getting very close.

Be careful out there…

PS Check out the article in the comment section from yesterday's post. Some technical analysis in the article but good reading. We were skepitcal about Thursday's V too but did think it could at least give a few days of sideways. Thanks for the info. (We did forget to mention that the Dow broke down through its 200 day SMA but we like to wait until the 200 day is turning over, which it is not, so far.)

Dow Industrials: 10,792.58 -99.34
RYVNX: 23.17 (above the October high)
RYAIX: 24.67 (new yearly high, highest since May13, 2005)
TLT: 85.79
BEGBX: 13.41

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