Wednesday, May 16, 2007

Back to the Same Old, Same Old

Market Action:
You already know what happened on Wednesday, a new Dow record high, but we will painfully push through some of the happenings. As we mentioned in our last post, volatility would pick up a bit this week and on Wednesday there was some movement. Early morning strength derived from mixed housing reports, something for everyone, particularly suited to the neo-bulls.

The actual housing starts were up (???) for the month of April, while building permits were down. Therefore, the stocks could rally for whatever reason they liked, stronger starts is positive and weaker permits allows the Fed to lower rates, or something like that.

All was well for about an hour and a half and then, out of no where a wave of selling came in taking the major averages down for about a half hour. From there though it was up the rest of the day with the Dow closing at another record high and basically closing at the highest ever, 13,487.

Maybe we should have stuck with our favorite sector, the semi-conductors, which happened not to participate in the rally on Wednesday. However, they have been on a run the last month, but remain below the highs of early 2006.

The SP 500 joined the Dow on Wednesday by moving to new relative highs for the move. This same thing can Not be said for the other indexes we follow. We are going to include coverage of the RUT (Russell 2000) more frequently in these pages, since it has been one of the leading indexes in the market since 2003. Looking at a ten day intraday chart for the Dow and RUT, they go in the opposite directions.

(For a picture of this, please use BigCharts in the links to the left and use the advanced charts. If you enter the RUT in the symbol space and use the time of 10 days and frequency of 5 minutes and then click the compare to box and click on DJIA, you will see the divergence of the two indexes.)

Right now, we feel like the technical indicators are the only thing we can watch. The media is so bullish that it can’t present an unbiased opinion on the market. Yeah, we know, what else is new?

Some of the items we noticed as we put together our numbers were the volume was lighter on Wednesday than Thursday and the new 52 week highs were less also. With these items starting to glare out from the market, other people should begin to see them too.

What was Down on Wednesday? That would be gold and silver and oil, along with the Euro, since the dollar was up again and the aforementioned semi-conductor index.

What will Thursday bring?

Dow Industrials: 13,487.53 +103.69 (yes, a record)
VIX: 13.50
HUI: 325.44
QQQQ: 46.55
QQQRS: 0.29 bid
QQQRT: 0.54 bid
RYVNX: 15.24
RYAIX: 20.49
RYCWX: 30.87
TLT: 87.87
BEGBX: 13.88 (dollar is moving up)


David Wozney said...

A U.S.A. dollar is not a “Federal Reserve Note”. In 1973, Public Law 93-110 defined the U.S.A. dollar as consisting of 1/42.2222 fine troy ounces of gold.

Glenn said...

Thank you for your comment, Mr. Wozney. You are correct that the US "Devalued" the dollar in 1973 for the second time. The dollar had been on a gold standard which valued the price of gold at $35 an ounce (yes, a troy ounce). After Bretton Woods was, shall we say, abandoned in 1971, the dollar was no longer directly tied to gold. Then as gold increased in value in a more free market, the gov't was forced to push up the value of gold from $35 to first $38 and then $42.22, as you mentioned. After that there was no more "lip service" paid to the tie between gold and the dollar because there is none. Gold and the US Dollar, or Federal Reserve Note, are allowed to float in the free market. This is how paper or fiat money eventually becomes worthless. And, as you know, the price of gold is around $650 right now, so the US Dollar has been devalued quite a bit since 1973 when it only took 42.22 dollars to buy an ounce of gold. Now it takes $650. Ouch, that's some inflation, or should we say devaluation.