Monday, April 09, 2007

Light Monday Trading

Market Action:
Last Friday’s jobs’ report managed to carry over to Monday’s opening and that was about all for the NASDAQ indexes.  The Dow managed to move higher but fell back by the close to only close up about 9, but it was up for the lucky 7th day in a row.  We noted that the volume was suspiciously low and was only able to trade slightly more than last Thursday’s volume to make it the second lowest volume of 2007.  So, for two days running, the volume has been quite weak.  

We don’t want to rely solely on volume to determine whether this market is about to undergo a reversal of fortunes but low volume is a good indication.  The market seems to be floating on air and not moving much in either direction.  

The stock market has shown that it is tired, like we mentioned last week when we made the analogy about the toddler trying to keep their eyes open.  We expect a sell off very shortly and then we will have to decide about the near term future of this market.  With the sellers standing by on this little rally, we have to see what kind of vigor they have during this upcoming down move.  

At the very least the Dow should trade down into the 12,400’s again due to the need to trade in that range.  When the market moves quickly from one place to another, it normally comes back to fill in that spot.  Going back to the large drop the Dow had back in late February, we can see that the Dow has nicely filled that entire drop in.  Down in the 12,400 to 12,500 range, the Dow jumped up through it and now we think it needs to go back down and at least fill it in and maybe more.

We wanted to mention the news from AMD (Advanced Micro Devices), you know, the company in direct competition with INTC.  They announced that they were cutting revenue expectations about 20% for this quarter.  And, they said they were implementing a hiring freeze and were going to cut cap-ex.  What did the market decide to do?  Well, we know you won’t be surprised when we tell you that both AMD and INTC were up on the news and both stocks closed up on the day.

Real Estate:
The news out of the mortgage industry continues to defy the market, too.  American Home Mortgage (AHM), an investment trust specializing in prime and near-prime home loans, said it was cutting its first quarter and full year earnings forecasts.  They have had difficulty selling their AA rated securities.  These are Not sub-prime players, they are in the Alt-A mortgage market but not sub-prime.  Their stock was down about 15% on Monday but it didn’t fall as far as it did back when we originally heard about New Century Financial about a month ago.  

Dow Industrials:  12,569.14  +8.94
VIX: 13.14
HUI:  354.00
QQQQ:  44.45
QQQRS:  1.37 bid
QQQRT:  1.92 bid
RYVNX:   16.53
RYAIX:  21.28
RYCWX:  35.33
TLT:  87.17
BEGBX:  13.83

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