Monday, April 07, 2008

Weak Rally Exposed

Top Line: Here comes the question: Has the rally lost its umph? On a day like Monday, it sure feels like it. The market respects that 12,750 line in the Dow, at least for now. Maybe it's revving up for another run. More below...

The most important topic this evening is Monday's market action. The strength in the morning gave way to the selling in the afternoon. What was the Dow high you may ask? 12,732 would be the answer, just inches from the 12,750 line. The resistance there is strong as we have mentioned. This is a level the market has set as a line, not us.

The important information about Monday's trading, sometimes lost on the rest of the world, is the low volume. Here we are in the middle of a "rally" and the market is having trouble making believers out of anyone, at least in terms of actually buying stocks. There is a notion of Relief that can be felt but not a lot of buying conviction. Of course, that is also seen in the selloff at the end of the day, but confirmed by the light volume.

These are the times that are difficult to "feel" and analysis is more of an art as opposed to science--yes, technical analysis can be thought of as science don't you think? Ok, maybe it is some voodoo but the 12,750 line has stopped the advance so there is some validity to it, at least.

Seriously, the weakness in this advance is evident and under normal price corrections this move ranks at a level that could be considered complete. So, even though our best guess is that the market will continue to rally up to near 13,000, if only to fake out the technicians, we must consider that there is at least a possibility that the advance is over.

We are long term bearish and have gotten, as we have said before, cute about this advance. We really thought there would be a little more power to it but we may have to reconsider.

The first earnings news was delivered by Alcoa (AA), the company that normally has the first release of the season. The news from AA was not particularly good. Remember the backdrop of this company is commodities which have had a good run. AA said that other commodities (that would be oil) and competition were hampering its earnings.

Likewise, Advanced Micro Devices (AMD) didn't wow the street either with its pre-announcement news. AMD is a direct competitor with Intel (INTC) and INTC had pulled out the stops to compete with AMD over the past year. This may sound like good news for INTC but that may not be true, except that INTC may have garnered some market share. But, how big is that market now?

AMD said that revenues would probably not hit targets and they would not return to profitability like they said they might a while ago. And, by the way, they have decided to lay off 10% of their workforce in case you wondered what they were doing about their situation.

These two bits of news have put a drag on the overnight futures' trading and may actually lead to some selling in the morning. This selling got started late in Monday's real trading and has now continued into the evening futures.

Ok, yes, there were some news events in the last few days that need to be mentioned. We saw that Greenspan had bothered to offer an op-ed piece to the Financial Times but thought it was a pay site so we didn't share it last night. Tonight there may be a way for you to read it or at least a review of it. Ok, enough all ready.

FSI: 80.36 (up just a little but the 8 handle "looks" nice)

Thank heaven for little boys...

His Dad does Rule...

1 comment:

Trish said...

It's about time we see more baby pictures! And the baby does take the top notch in both pictures, but you have to know (from me) that I did notice the "moon" in the 2nd picture on his blanky! LOL! He's getting more and more cute (must take after his mom and grandma Pam). He also seems to be more alert. Thanks for sharing!