Top Line: Don't let the fact that the NASDAQ was down about a percent on Monday fool you. The market was lower on Friday and today's down move was not strong enough to break through to new lows. The market is in the best position for a few up days. Oh, no, this is not a trend change just a relief in the selloff.
If you take the time to look at the trading in the last half hour of trading on Monday, you will see a drop in the averages going into the close. Normally, this is a tipoff that the morning's trade might be weak, too, but we don't think that will be the case. That may not be the result this time.
The details are that the NDX traded down to 1829 on Friday but Monday could only get down to 1837. Again, these are subtle differences but the market knows that these types of things are important. The public is fairly bearish which is enhanced by a down day in the NASDAQ. We are not convinced.
So, let's back up a little. The news doesn't matter right now...we don't think it ever really does but we like to follow it just to see if there are better days to trade than others. The first issue is the calendar with the end of the quarter, end of the month, and the Fourth of July holiday weekend. When we wrote this list last night, we failed to mention our favorite event of the month, the jobs' report.
With the Fourth of July holiday set for Friday this year, the jobs' report will be moved up to Thursday morning. Thursday is a short trading day and there is no trading on Friday. We don't have a good feel for the jobs' report and its effect on the market this week. The market is already expecting another negative jobs' number with a reduction in the unemployment rate.
Getting back to our position, we think the jobs report could indeed be the timing of the high water mark for stocks in July. Looking back to June, the report was expected to be ok and the market was popping just before the early morning report. Then, that 5.5% unemployment rate punched the futures in the mouth. Let's see what happens in July.
We received an email today asking the question if AIG might be worth a Jackson (yes, that's the 20 dollar bill, not the grandson) plus a couple of bucks. We mentioned that AIG might lead the market down (check our May 21st post, "Below 12,750 and Confirmed by our own FSI") and our Top Line that night was: "The stock market gave a signal on Wednesday that the rally we have seen since March is largely over and we are now headed down." That was two days after May 19th when our Top Line said: "The stock market saw an intraday reversal that, in the NASDAQ 100 (NDX) at least, creates a very bearish picture indeed." That day the Dow closed at 13,028.
Tonight we see that the Dow has closed at 11,350, about 1,700 points. We're not saying this is the low for the year, that is coming later this summer, but what we are saying is that the next few Days, we May see a little rally. We are looking to the Thursday morning jobs' report for a tipping point. But, it could be next week sometime.
By the way, this is Not trading advice. The market is very weak right now and may not hold up. Surprises are to the downside in bear markets. Be careful.
FSI: 85.85 (another low weighed down by RIMM again)
So, here's why you came back. A couple of pics of Jackson.
The first one is Gramma stealing toys from Jackson...be nice Gramma. (Maybe Grampa has a chance, after all)
Do you know those E*Trade commercials? (YouTube video--be careful if you're at work) You know the ones where the baby is talking and trading and gets himself a clown with all the money he making in E*Trade's savings account...Jackson said he wants to be the star.
A couple of good pals...