Monday, May 28, 2007

Technically Weak Friday

[We would like to say thanks for a good time this past weekend in Evansville. We appreciate the hospitality we were shown when we were there and it was good to see you.]

Market Action:
The stock market decided to move up after Thursday’s strong down move. We figure that there are still enough people out there who are looking for “bargains” after the mini fire sale the day before. By the end of the day the Dow was sporting a pretty nice gain while the other major indexes were making modest recoveries from the day before. The Dow recovered nearly 80% of its Thursday loss, while the NASDAQ Comp and the SP 500 gained back about half.

Granted, Friday was the day before a long holiday weekend and the Friday before a Memorial Day holiday has has a strong upward bias in years past. (Last year’s Dow point move was up 67.56 compared to this year’s 66.15 up move.) We stress that very little can be taken from this day due to the technical factors surrounding the day, such as very light volume.

In fact the volume was the lightest of the year so far.

The technical condition of the market is again precarious. We look at the recovery of the Dow on Friday and try to imagine how that can affect trading over the Next few days. As we said earlier, we can not gain much from Friday’s trading.

Our take on the position of the market is based on the NASDAQ 100, NDX. Starting on Thursday afternoon, the NDX dropped into a low near Thursday’s close and this drop was from a new relative high. It was a strong down move and could be the start of a fairly large down move. So far, the corrective rally has not taken much of the decline back. In fact, the retracement has been nearly a perfect 38.2% move.

If we see some follow through to the downside over the next few days, we might just conclude that the decline is for real. The Dow doesn’t have quite the same pattern but could be coaxed into it if the market could hold the high from last week. We did manage to have a down week last week in the three major indexes we follow. We now need some good follow through.

News for the Upcoming Week:
As we go into the new week, a short trading week, there are a few items of note, most of them being on Friday, especially the May jobs’ report:
This week—Maybe some more deflation talk from the Update
Tuesday—Consumer confidence
Thursday—First quarter GDP, second guess (first guess was 1.3%)
Thursday—Chicago Purchasing Managers Index (PMI)
Friday—Jobs’ report (commonly known as non-farm payrolls)
Friday—Personal income and spending (with PCE inflation)
Friday—May ISM Index
Friday—Pending home sales for April

Dow Industrials: 13,507.28 +66.15
VIX: 13.34
HUI: 322.25
QQQQ: 46.45
QQQRS: 0.24 bid
QQQRT: 0.49 bid
RYVNX: 15.32
RYAIX: 20.56
RYCWX: 30.88
TLT: 86.37
BEGBX: 13.75

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