Tuesday, October 31, 2006

The End of October

Tuesday ends October and possibly begins a fragile period for the stock market.  The last day of October represents the fiscal year end of many mutual funds providing the last chance for some managers to adjust to their best portfolio.  Many of them have huge compensation packages based directly on performance so this day can be a little interesting.  We can’t comment on how significant today was due to this activity but the volume did pick up just a little bit from the last few days.

We think the window of opportunity for the stock market to show its vulnerability is the rest of the week.  Given that the jobs’ report is due on Friday, we have already made a mental note of the importance of this week’s report.  The ideal situation for us would be for the market to go into a holding pattern for two days and then open strongly on Friday.  That would be a good signal to us but we usually don’t get such nice signs from the market.  We’ll need to use some good judgment.  

As for the trading day on Tuesday, there was some motion seemingly related to news, which is odd in itself.  The number of most concern was the employment cost index which was up 1.0% for the quarter compared to the consensus view of 0.9%.  Another number of concern was the consumer confidence number which came in below expectations, 105.4 versus 108.0.  Lastly, the Chicago Purchasing Managers Index came in well below expectations of 58.0 at 53.5.  Last month’s number was 62.1 so a fair bit lower.  All of these numbers were considered and then dismissed as the market basically decided to trade on something else after the news.  For a while, though, these numbers mattered a little.  Wednesday brings us an important housing number, pending sales and we are interested to see what the market will do with that one, whatever it is.

We can appreciate the fact that this market has been less than fun for the past several months but we expect that to change very soon.  When it does, we probably will wish we were back in these days of denial.  Till then we are going to be vigilant.  After all, we do have some funds left to deploy, not a lot, but some.  

Dow Industrials:  12,080.73  -5.77
VIX: 11.10
QQQQ:  42.58
RYVNX:   18.12
RYAIX:  22.15
RYCWX:  37.41
TLT:  89.81
BEGBX:  13.85

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