Wednesday, December 20, 2006

Subtle Changes in the Market

Wednesday brought another selling opportunity at the beginning of the session.  The stock market was up fairly strong in the early going with the NASDAQ indexes trying to play a little catch up with the blue chip performance the day before.  The NASDAQ Comp was up about 0.5% in the first half hour which turned out to be the peak for the day and a steady sell stream the rest of the day.

The trading pattern is pretty much as it should be for the NASDAQ Comp over the last few days.  At some point the index will need to have stopped going up and then turn down.  The Comp failed to make a new relative closing high this week compared to the close on November 22nd, the day before Thanksgiving.  The intraday high on Monday this week did edge out the trading high in November but the market experienced those reversals as we discussed earlier this week.

Then on Tuesday the Comp opened down hard but managed to climb back to close with just a small loss.  On Wednesday, the index is now filling in the gap it left on Tuesday morning.  We don’t want to get too technical but just follow the possibilities.  The Dow makes a very visible new high, as we call it, a headliner high after that disastrous start on Tuesday.  Even the SP 500 didn’t manage a new high on Tuesday.  We realize that we are splitting hairs at this point but clearly the Dow is leading this advance—this is not bullish.

The most dangerous thing for market participants as we look at the low complacency number, VIX, is we are entering a low volume period of time between the holidays.  As the participants come back after the New Year we expect another try at a new high for the Dow on significant volume.  At that time we probably can declare the Dow at a peak; but, wouldn’t it be a little naked without the NASDAQ indexes at least making new relative highs?    

One item in the news caught our eye, that of FDX (Federal Express) warning of a profit drop due to fuel prices not matching up with surcharges.  At the same time, we noticed the fall off in the transports in general as they dropped over a percent on Wednesday.  You might consider that the oil price going up might affect the transports a little more than other industries but those stock prices have not been affected by the price of oil as it has been going up.  We believe there is a change in the wind for the market in general and these little signs are the reasons we think that time is very soon.  

We plan to publish a post on Thursday evening but we haven’t thought about next week.  At this point, we think there will be time to do postings next week but we don’t know if there will be anything to report due to lack of interest.

Dow Industrials:  12,463.87  -7.45
VIX: 10.26
QQQQ:  43.69
RYVNX:   16.75 ??? (ex-dividend probably)
RYAIX:  21.22 ??? (xdiv?)
RYCWX:  36.29 ??? (xdiv?)
TLT:  89.63
BEGBX:  14.12

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