Short Term Bearish

[fuzzduzz]

Intel closed at an low for the year! Let me repeat that (Intel closed at a new low for the year) There was 258 million shares traded. That's the big boys getting out (fund managers, institutions etc.. ) Intel is below there 200 ma!!! Inventories are up and margins are getting squeezed and this will slow sales down. That's why they're dumping it.

The sox is now below it's 200 ma. Most semis have broken down and are below major support. For years the sox has lead the naz and the naz has lead the rest of the markests. This is all very negative for the markets and the charts are reflecting that.

Investors money went into the defensive sectors (healthcare, biotech, drugs.hmos,gold,utilities,oil and energies) that's bearish for the rest of the markets.

The market opened lower then attempted to rally only to fail on heavier volume on the downside. Naz dropped on its heaviest volume in 3 weeks.

The indexes (S&P, NAZ, SOX) are all below major support areas and falling on heavy volume. Until the big boys make a commitment to buy the markets can't sustain any type of intermediate move upward. I think will go down til late fall before we get a buying oppurtunity. But as always I'll follow the charts.

We are oversold so I'm hoping (praying ) we get a bounce here so I can get out of the S fund and into the G fund. Although the F fund looks the strongest right now (yes even in a rising interest rate enviorment) I think that it's looking clearer that the economy is slowing down so the fed won't be in any hurry to raise rate quickly and that's why the F fund is looking better than the others.

In my humble opinion :^

[Mike]

I don't think you can say the economy is slowing down based onone month's data. Most economists continue to expect strong GDP growth as well as continued job growth. I think the June data was a "blip" (a fluctuation in job growth). Interestingly, wholesale prices for the month actually dropped, which runs contrary to the expectation of inflationary pressures in an expanding economy.

[tsptalk]

Another good indicatorof a strong ecomony is the Dow Transports Index. It usually leads the way also. The index made a new high in July. Take a look this chart.You'll have to cut and paste the link into your browser.

"finance.yahoo.com/q/bc?s=^DJT&t=1y&l=on&z=m&q=b&c"

Looks likes it's falling in the short term?

[tsptalk]

Just a normal pullback, but was up nicely today.

The AAII investor sentiment came out at 47% bulls / 24% bears. That surprised me. Still a bit too bullish for my liking. I think we may be in for more pain, but unlike fuzz, I think it will only be for a few more weeks.

Here's that Dow Transports chart...

http://www.tsptalk.com/images/transports.png
Chart provided courtesy of http://www.decisionpoint.com (http://www.decisionpoint.com)

The way the market has been lately, I am only meekly disagreeing with fuzz :).

[tsptalk]

Interesting reading (:zz) on the June slowdown being overplayed by the market and that July has showed signs of a resumption of economic growth...

http://www.wachovia.com/ws/econ/view/0,,1883,00.pdf

"Latest data from both the New York and Philadelphia manufacturing surveys suggest that economic growth may have picked up again after a June lull."

[Mike]

I figured as much.

I'm not going to be victimized by the "herd mentality" of the market.

Funny how perspective changes with time - just two years ago, we all would've jumped for joy at the June economic data, but now, it's perceived as "an economic slowdown / downturn". Heh.

[Cortez]

Here is an argument for a downside breakout.

Stocks have been stuck in this current trading range for 128 trading days. Looking back, stocks got stuck in an 8% trading range for 80 days or more only 13 other times from Jan. 1, 1979 to the present.

It always seems like nothing happens in the markets during the summer... and judging by the research in Barron's, there's some truth to that feeling: 10 out of the 13 previous long stretches of nothingness occurred over the summer, ending in July, August or September.

The same could happen again. Let's take a look at the last two long trading ranges, to see how they ended...

The last boring trading range lasted 90 trading days, from Dec. 14 to April 26, 2002. After it ended, the stock market was 18% lower six months later.

The boring trading range before that lasted 88 days, running from June to Oct. 9, 2000. Six months later, stocks were down by 17%.

[tsptalk]

Cortez wrote:
The last boring trading range lasted 90 trading days, from Dec. 14 to April 26, 2002. After it ended, the stock market was 18% lower six months later.

The boring trading range before that lasted 88 days, running from June to Oct. 9, 2000. Six months later, stocks were down by 17%.

Of course both of those were during the bear market but it is interesting that the 2000 range was also a presidential election year. I wonder how many of those 13 were election years wherethis type of action seems typical. You can see the action tends to come in the second half of the year with the first half basically flat and it does havea definate upward bias...

http://www.tsptalk.com/images/election_years_020204.gif