Wednesday, April 11, 2007

FOMC Minutes Cause Some Selling

Market Action:
Finally, some action!!!  As the market opened on Wednesday, it didn’t take long for the sellers to appear.  Even with the strong earnings from AA on Tuesday evening, the Dow was quickly down 35 points on its way to down about 100 an hour and a half into the session.  The broader market was lower with the NASDAQ Comp down about 20 around that same time.  

That was it for downside and the buyers came in to bid up prices until the FOMC minutes were released at 1:00 CDT.  That news indicated the Fed is ready, willing, and able to raise interest rates due to the threat of inflation.  That caused the bottom to drop out of the market for about five minutes and in that space of time the Dow dropped about 35 points and then headed for its low of the day, down about 115 at one point.  From there the buyers took it into the close with the Dow down 89 points at the bell.

After the bell, RIMM (Research in Motion, a Canadian company) announced its earnings.  The news was fairly good but the after hours market punished the stock by 7%.  The stock was down over 2 during the day and then another 10 after hours to trade in the 135 range.  We have mentioned this stock here on occasion and recall when this stock was in the mid 60’s about a year ago.  It seems the market didn’t think the news that the SEC has upgraded its inquiry into its stock option granting practices to a formal investigation or maybe the earnings were not quite good enough.  We’ll see how the real trading goes on Thursday.

This down move has something to prove to us.  We want to think we are at the beginning of a pretty good sized down move so we need to see some proof of that over the next few weeks.  Even though volume did get back to a healthy level on Wednesday, there could have been more pressure on stocks.  We generally don’t like downside moves that have “news” attached to them because the market quickly figures it has dealt with the news.  We like it when the down moves are inexplicable as the big late-February 400 point down move was.

With many companies reporting next week, there could be adequate reason for the sellers to come out.  Expectations for good news have been modestly curtailed for several of the companies we follow so maybe they can escape the wrath of sellers if the report negatively.  Tonight, we can only watch with caution as the next few days of trading unfold.  We are waiting with anticipation.  

Dow Industrials:  12,484.62  -89.23
VIX: 13.49
HUI:  354.40
QQQQ:  44.21
QQQRS:  1.49 bid
QQQRT:   2.08 bid
RYVNX:   16.73
RYAIX:  21.41
RYCWX:  35.83
TLT:  87.37
BEGBX:  13.88

No comments: