Monday, January 22, 2007

A Down Monday

Market Action:
For a Monday, this was a curious trading session.  At the opening bell, the market had a false start being up for about three minutes before being called back to the starting line.  But, when it fell back to the unchanged line, it didn’t stay there and kept going down.  

In the early going there was an announcement that the leading economic indicators would be delayed until Tuesday but it seemed that it didn’t really sink in until the time they were to be released.  Then, when the LEI weren’t released the market dropped hard for about ten minutes with the NASDAQ Comp falling 15 points in a less than 10 minutes while the Dow lost about 50 points in the same time.

The market averages leaked for about another hour before starting some sloppy buying the rest of the day.  The market closed about where it was an hour into the day but still down.  The bears win again as we saw the market drop without a spirited rally.

After the close, TXN (Texas Instruments) announced that it had beaten sales and earnings estimates.  This news bolstered the after hours trading session for tech but didn’t really do too much.  TXN rose almost 3% in the late session even as they forecast first quarter results for both sales and earnings would be less than analysts had expected.

With TXN rallying in spite of a dreary forecast, we look to Tuesday for some clues about the market.  The Dow finally succumbed to some selling as BA (Boeing) was downgraded and dropped about 3 points (3.4%).  BA has been one of the top performers in this four year rally.  Here is your market leadership.  Think about this after 9-11 and the increase in fuel costs, BA has made all time new highs in the last few months.  One by one, these leaders are finding it more difficult to lead the charge.      

In Monday’s market, the price of oil started out 2% higher and was blamed for the drop in the stock market but later it fell so that it was down 2% on the day.  The stock market failed to rally very much on this drop.  We have never paid much heed to the price of oil when it comes to the stock market because it seems the same dynamics that rally stocks have a tendency to rally oil prices as well.

With the stock market pointing in a down direction, we are extremely anxious for Tuesday’s trading.  The little uptick in TXN is just a teaser for the over night bulls.  We don’t think it really has the ability to run the market up much.  Our position is now that the market wants to correct this move up from last summer.  That means that we should be on the look out for a substantial retracement of the up move, at least 50% and maybe more.  If we are experiencing the end of the run, the drop may be the start of something stronger to the downside.  For now, we will just watch it one day at a time.

Dow Industrials:  12,477.16  -88.37
VIX: 10.77
HUI:  315.04
QQQQ:  43.69
RYVNX:   16.87
RYAIX:  21.35
RYCWX:  35.48
TLT:  88.20
BEGBX:  13.55

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