Wednesday, September 27, 2006

2 Points Away

Wednesday’s news had durable goods down and new home sales up.  Both of these results seemed to confuse the players who were comfortable with an expected little increase in durable goods and also assuming new home sales would be flat or down.  The market was trying to figure out just what the Fed was thinking. To help the traders decide what to do, MSFT raised its dividend and produced some upside in the indexes.

All in all, the stock market is now struggling for gains and it is Wednesday.  We do think the market is almost tapped out with good news.  Higher volume numbers indicate to us that the market has Found some sellers at these prices.  This results in lots of volume, actually not that much, and not so much price movement.  

The confidence shown in the market during the past few weeks is almost beyond belief and still there are very many bulls out there.  As our last post indicated, there are many who seek the ultimate Nirvana, that being the Dow at new highs.  Well, Wednesday’s trading brought the Dow within 2 points of that all time closing high but before the close it had slipped back some.  The Dow is so close to that old high that it would almost be a shame not to touch it.  That way, all the bulls could relax and say that they were enjoying Nirvana.  Ah complacency is nice and relaxing, isn’t it?!?

The big mover was oil with a big round trip from the $61 opening price to the early morning low around $60 back up to close around $63.  It was a tough day.  This didn’t really seem to bother the stock market all that much but the stock market is near Nirvana anyway so it’s not bothered by anything.

Tonight, we are seeing more underlying deterioration in the technicals and we feel the need for the market to go down, at least a little.  We did think that Wednesday would probably put in the high for the rally—we will only know that is true in the future.  The main issue is now seeing if we can get the thing to roll over and go down.  The bullish momentum seems pretty contagious but we have been vaccinated from this virus.

The next two trading days will tell us much about the state of the market.  We won’t be surprised at anything that happens but we know the market is weak under all that bullishness.  When the façade comes off, there will be some exposure to the downside.  We look forward to the next down move which could have started Wednesday.  

Dow Industrials:  11,689.24  +19.85
VIX: 11.58  (pay attention to this number)
QQQQ:  40.72
RYVNX:   19.67  (own)
RYAIX:  23.04
RYCWX:  39.58  (own)
TLT:  89.63  (own)
BEGBX:  13.75

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