Market Rises as Reality Weakens
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There was very little market action to evaluate
from Thursday, with the SPX daily range at just 4.8 points, before closing at
1456.81 (+.01%). There were 3 days down into Monday’s 1431.44 low, and now
3 days up to yesterday’s 1457.97 intraday high. There was some Federal
Reserve hype this week, in addition to some options expiration activity, until
yesterday, when the NYSE volume dropped to only 1.38 billion shares with the
volume ratio 57 and breadth +597. The only sectors red were energy, with
the OIH -1.9%, XLE -0.9% and the $TRAN -0.3%. Gold advanced for the third
straight day, with the $HUI +1% and +3.7% over the past 3 days. Gold
advanced as the $US dollar declined for the third straight day. The Fed
has flooded the market with liquidity, and this has fooled nobody except the US
media, certainly not foreign investors who read it as inflationary to go with
slow growth in spite of what the Fed says about how strong the US economy
remains. The $US dollar closed at 84.02, and the probability is increased
that it will make new lows in 2007. Also, the bulk of earnings season is
in, and I read in a summary that 67% of the companies reported lower
expectations in their forward guidance, which is the most in 8 quarters.
Of course, when they report the next time, it will be “XYZ Corp. beats
expectations by a penny,” but there will be no mention in the media of the
greatly reduced expectations prior to the “better by a penny” BS, which means
bumpkus. Equity markets don’t like slow growth and high inflation, and
despite reports to the contrary, that remains the highest probability right now.
Daytraders were handicapped by the SPX narrow
range yesterday, but had better results with the OIH, XLE and some of their
components, which had declined early to their -1.5 VB zones. The contra
moves from the zone was profitable, but was not a significant reversal.
The sector will continue to be volatile for obvious Middle Eastern reasons, but
there is certainly a difference of current opinion by some analysts.
Sanford Bernstein & Company came out on Wednesday and said that oil could drop
to $40 in March 2007, and may even drop to $30 some time this year. The
contra side is Goldman Sachs, which said that NY futures could rise to 71.50 a
barrel this year (it reached 78.50 on 7/14/06). Goldman also said in
December 2005 that oil prices may go as high $105 a barrel in a spike that may
last until 2009 (source Bloomberg). Regardless of how it plays out, the
volatility will continue to benefit daytraders the most.
See the 2/12/07 commentary for current market
timing symmetry.
Have a good trading day,
Kevin Haggerty
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