Sunday, July 23, 2006

Bullish Angst

The stock market decided to go down some more on Friday, adding to our angst about whether it wants to go up or not.  We held our long positions through Friday and will be especially watching them to see if the market really doesn’t want to go up for a few weeks.  When you see the extreme pressure exerted by the sellers (bears to us), there really seems like no upside coming at all.  

After Wednesday’s strong advance on the back of the good Fed Chairman’s dovish speech (dovish on interest rates), we did think there would be a little pullback followed with a nice rally that would allow us to reestablish our short positions.  Again, we look at the headline Dow Industrials and see that index not being hit as hard as the NASDAQ indexes we follow.  For example, for the week, from Friday’s (14th) close to Friday’s (21st) close, the Dow was up 129 points while the NASDAQ Comp was Down about 17.  So, roughly the Dow was up about 1% on the week and the Comp was down about 1%.  

Yes, we seem to have gotten to cutesy on our trade for the week but we still think there may be some upside this week.  If no upside comes to relieve the bull’s pain, there will be some significant selling sooner rather than later this summer.  The market will not be kind on the next downswing, which is why we would like to see a little rally for you to sell into and for us to take up our short positions again.

Last Friday was options expiration and there may be some overreaction to that.  Volume (NYSE) was the strongest of the month most likely due to the expiration.  Monday will bring us some answers to our questions but the next two weeks are going to be filled with opportunities to Make Mistakes.

We do have some interest in the list of news items for the upcoming week.  With Tuesday bringing us the June existing home sales and Thursday the new home sales, we will be looking forward to those reports.  Thursday also brings the durable goods orders which we like to follow but the market tends to shrug off.  We have noticed the media recent efforts to try to down play the housing sector’s influence on the rest of the economy.  Maybe the stock market is listening, maybe not.

Dow Industrials:  10,868.38  -59.72
RYVNX:   25.35  (too cutesy)
RYAIX:  26.00
TLT:  85.33
BEGBX:  13.47

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