Monday, June 11, Daily Market Assessment

It Turns Out There Is A Three-Day Work Week!

If you look closely at the market action over the past several months, one notices that Fridays are mostly sideways or up, and Mondays are mostly sideways or down. And almost every Monday or Friday shows below average volume. So, what gives? Obviously, the institutional traders are not working on Mondays and Fridays! Given the money these guys make, I'm not surprised.

But the result is that I can't give too much credence to Friday's nice 160+ bounce in the DOW, even though it was a break in the three-day reign of the bears. Volume was off almost 25% from the day before, and the $2 drop in oil prices probably had as much to do with the jump as anything else.

In fact, the best metaphor for our current market is a boxing match. The guy in the red shorts is a bear, using fear of interest rate increases as a powerful short jab; the bull is wearing blue shorts, and he is constantly dancing around, waiting for an opportunity to throw a round-house knockout punch with some good news. These days, nothing is dominant; we're battling to a standoff round after round, week after week.

Today we probably won't see a big move in any direction, as the market waits for some new news on the economy or interest rates. Later in the week we should see some early peaks at 2Q earnings, which I believe will be as strong as 1Q earnings. That will propel the market up to a set of new highs, but probably won't happen until July. In the meantime, fear will rule, and another good-sized step down is likely, even if the major indices stay close to their 50-day averages.

Summary: Long-term Bullish, Short-term neutral

Friday June 8 Daily Market Assessment

Boy, When I'm Wrong, I'm Really Wrong!

Early this week, I was confident that the market rally would continue. Yes, I saw some sideways action in front of us, but I did not imagine that the market would react so negatively to Ben Bernanke's relative optimism. In fact, what the traders saw in his remarks was the end to any possibility of a rate cut this year. That insight put the market into a tailspin from which it has not recovered as of Thursday's close. We've watched more than 3% get wiped off the S&P 500 in three days, and my accounts are damn close to zero YTD! And I'm not sure it's over yet. Friday will be a critical day to watch the market. If it rolls over and plunges south another 100 points or so, I think it's safe to say the bull market is over for awhile.

On the other hand, if the traders see this as a buying opportunity, and jump back in, then we'll be back on top in just a week or so. That's what I'm predicting!

The market's fundamentals have not changed; business is still very good, especially for the big, blue chip guys who are making money hand over fist all over the world. Yes, it's true that interest rates are going to remain high, but so are profits, apart from retail. Inflation does not appear to be a serious threat, in spite of Bernanke's cautions, and all the other metrics suggest that we are accelerating out of an economic dip. I say, "All Aboard!"

But I could be wrong; I was wrong this past week, remember.

Summary: Long term bullish, Short term nervous!

Monday June 3 Daily Market Assessment

No News is Good News

It's unlikely that anything of significance will occur until Tuesday, when Ben Bernanke is expected speak at an international monetary conference. His mildly optimistic comments about the U.S. economy early Tuesday morning should send the markets up again. But, in the meantime, I expect more side-to-side action, with a possible bias to the downside on Monday. Oil stocks look good for the summer, as do blue chips in general.

Summary: Short-term Bullish, Long-term Bullish