Sunday, February 11, 2007

The Bears Win on Friday (not Super Bowl)

Market Action:
As is often the case, and we mention it quite often, the way the market starts seems to be the wrong direction for the day.  Friday is a good case in point.  The Dow jumped about 40 points at the bell.  Apparently, there was some big excitement in the early going because a hedge fund had its IPO.  FIG (Fortress Investment Group) broke at $18 and then opened at 35 before closing at 31, quite a day for a hedge fund.  

The market traded up for about ten minutes before it sprung a leak and started to sell off.  The sell off intensified mid-day as Micron Technology (MU) made an announcement that flash memory (the kind used for digital cameras and other devices) prices were going to plummet as supply would overwhelm demand this year.  That announcement seemed to hit the techs pretty hard as all across the board they seemed to be sold.

By the end of the day the market did try to limp higher into the close but the day was definitely a win for the bears.  The Dow was down over 50 and the NDX, our favorite index, the NASDAQ 100, dropped 25 points or about 1.4%.

As we mentioned at the top, Friday started out strong but finished very weak in keeping with the “be careful at the opening” theme.  Could this be the break in prices we have been looking for over the last couple of months?  The answer is a cautious yes.  With this drop, the market is saying in technical terms that the rally from last summer will now be at least corrected if not retraced completely.  In either case, the next major move should be lower.

With the market giving a good signal that it wants to turn down now, we are going to be spending most, if not all, of our time in this week’s posts on the stock market.  The market should give us more and more signals that it is turning down and we want to point them out here in these posts.

The upcoming week looks like it could have some news items that could better confirm our near term thought that finally the market is rolling over.  

Upcoming News Events for the Week (a busy week ahead):
December Trade Deficit—Tuesday
Applied Materials’ (AMAT) earnings—Tuesday
Retail Sales—Wednesday
December Business Inventories--Wednesday
Bernanke at the Senate—Wednesday
Bernanke at the House—Thursday
February NY Fed Manufacturing Index—Thursday
February Philly Fed Business Index—Thursday
January PPI—Friday
January Housing Starts—Friday
February Options Expiration--Friday

Dow Industrials:  12,580.83  -56.80
VIX: 11.10
HUI:  340.06
QQQQ:  43.84
RYVNX:   16.82
RYAIX:  21.36
RYCWX:  35.04
TLT:  87.63
BEGBX:  13.53

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