Monday, July 31, 2006

Dull Last Day of July

The last day of July has yielded little in the way of new information for us.  The stock market basically took the day off especially after the big Friday rally.  Our indicators are still showing an overbought market and we expect that the next few days will bring small if any upside price increases.  

There are a few news items on tap for Tuesday that we have mentioned in the past couple of posts.  The July Challenger layoff report, something we haven’t discussed here before, is due out well before the market opens.  This report indicates mass layoffs at larger firms that were announced in July.  About an hour before the market opens, the June personal income and spending numbers will be available both expected to rise about the same as last month.  About a half hour after the market opens, we get to see the numbers we want to see, the June pending home sales.  Also at that time are the June construction spending, expected to be up 0.3% compared to last month’s decline of 0.4%, and the July ISM manufacturing business index.

These numbers do have some significance due to the “data watching” Fed.  The Fed is trying to hold rates level next week when it meets so they are crossing their fingers and toes that the data allows them to hold firm.  We put a rate increase next week somewhere between “no way” and Dumb and Dumber’s “so you’re telling me there’s a chance” of one in a million.  Okay, maybe we need to be a little more open minded about yet another rate increase but the Fed is definitely concerned that it has already gone too far.  This is notwithstanding some of the recent tough inflation comments.  

We are in the camp that thinks whatever the Fed does or says next Tuesday will be largely sold by the stock market.  Meanwhile, the dollar will probably not like news of no rate increase.  As we have seen for the past few days, the dollar has been a little weaker suggesting it believes that the Fed is Done.  Since the stock market has had So Many “Fed is done” rallies, we just don’t think there will be much of one on that news.

Nothing much went on Monday so we’ll be back tomorrow for a recap of whether or not the news items of Tuesday can move the market.

Dow Industrials:  11,185.68  -34.02
QQQQ:  37.10
RYVNX:   23.47
RYAIX:  25.02
RYCWX:  42.81
TLT:  85.80
BEGBX:  13.58

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