Can We Have a Down Week?

Market Action:
Friday happened to be options expiration so there seemed to be some buyers out early and the tone of the market was, yet again, bullish. Volume was stronger, most likely due to options expiration, but not as strong as we saw on May 1st when there was 130 million more shares traded on the NYSE than last Friday.

Opinion/Analysis:
By many measures, the stock market is getting tired or at least showing signs of fatigue. The main ingredients are the soldiers are not following the lead of the generals, meaning the smaller stocks are not going up anymore.

Last week, which the media has let everyone know, the Dow was up for the seventh straight week and there was nothing out there that could derail this freight train in the upcoming week. At the same time, the NASDAQ Comp, the NASDAQ 100 and the RUT (Russell 2000) were all down. The semi-conductors were down 3% last week.

A further market rally seems to be a foregone conclusion by most pundits, except for a few of us. As you well know, this market has gone up in spite of our analysis to the contrary. This is the kind of rally that deserves to go down, and go down hard, but for some reason the media can imagine a market that may never go down again. This is simply not true and it is so not true when this kind of thinking is going on. We think there will come a day very soon that the market will just drop for no reason at all, and then keep dropping because of the leverage of the hedge funds or for some other reason.

An article in the WSJ caught our eye this evening, “Economy May Revive Without Consumers”, talking about how, yes, the consumers did pull in their horns a bit in April but not to worry because the other areas of the economy would be able to pick up the slack. Since we haven’t had a consumer led recession in so long, there won’t be one. We beg to differ on this score. The consumer will lead this recession as they stop buying, mostly, houses, but other things as well. If the consumer won’t buy things, why would they be made in the first place?

News for the Upcoming Week:
This week—The Update will tackle the deflation topic.
Tuesday—Redbook sales index
Thursday—April durable goods orders
Thursday—April new home sales
Friday—April existing home sales

Dow Industrials: 13,556.53 +79.81
VIX: 12.76
HUI: 328.59
QQQQ: 46
QQQRS: 0.25 bid
QQQRT: 0.45 bid
RYVNX: 15.17
RYAIX: 20.44
RYCWX: 30.34
TLT: 86.93
BEGBX: 13.84