| Leading Stocks Stir, but Market still at Crossroads |
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Jon
Preferred Member
Cash: $ 50.02
Posts: 193
Joined: 13 Apr 2005
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| Leading Stocks Stir, but Market still at Crossroads |
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Stocks closed out the week basically where they started, trying to put something together right at their downtrend resistance. A trend tends to stay in place unless it has run its course or something acts to change it. The market absorbed a lot of bad news about the Fed over the past few weeks, unable to hold up in face of it. It has also let off a lot of steam during that selling and has started to rebuild with bond yields recovering, a modest follow through Wednesday, and some leaders starting to break higher. That latest element is the most encouraging as this market has lacked leadership ever since April. Thursday and Friday leaders were starting to make moves even as the market sputtered. This week we need to see the indices follow their lead with some decent trade if this downtrend is going to break here. We have a lot of new upside plays on the report, indicative of this leadership return.
Though we do see some positives we have to put it in perspective. The indices are still in downtrends and the move up the past week was on no volume. Of course, there was only one session that moved up and it was a relatively weak follow through attempt. SOX turned lower more than the rest of the market Friday, and it led the other moves lower. SOX remains an important indicator in the coming week.
It is also a tough time of the year to move higher. It is not unprecedented, however, particularly with the sell off ahead of earnings. We already saw some impact of solid earnings and good guidance this past week with FDX, Inco, et al. Analysts are starting to move their earnings expectations back up after lowering them in anticipation of a slowdown. We would prefer to see them lower still heading into earnings to get a better jump, but the market has definitely let some air out. A good time to do so; beats entering earnings season with a strong rally.
The indices head into this week still at a crossroads, still in the downtrend but showing signs, albeit faint, of trying to break the trend. After the weak Wednesday follow through attempt, the market is still in need of a strong upside session to show the buyers are interested. That would, naturally, take the indices out of the downtrend. That leadership will help, but we also still see a lot of stocks that have bounced back to resistance from nasty selling and look to be stalling out. Again, this is the lick log time for the market in this move, but as noted above, if the Fed goes 50 BP what would appear to be a real downside catalyst for stocks may turn out to be the trigger of a rally after some initial ‘surprise.’
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Mon Jun 26, 2006 2:44 am |
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