Overheard On The Street
Here’s what they’re saying at mid-day:
Paul Rabbitt, President,
RabbittAnalytics.com: “A triple witching Friday always assures plenty of
action mid-week. The reversal of stock prices in the past two weeks has not
created upward momentum. Don’t get us wrong, we raised equity exposure and
remain bullish, but the down-momentum has merely dissipated and been replaced by
a trade-range market that is short-term overbought. Traders should protect
profits, recalling that stocks have rallied 7% to 14% over the last two weeks,
depending on the index.
“This week marks the beginning of earnings pre-announcement season. Last
week P&G and EDS forecasted weaker second-quarter results, driving the Dow
lower. Keep in mind that typically, companies that are going to disappoint the
Street pre-announce early to minimize lawsuits, thereby increasing short-term
trading risks.”
Paul Desmond, President, Lowry’s Research
Reports: “Is this a bull market or a bear market? Whatever your answer,
you’re probably half right. About 50% of stocks appear to be in uptrends, and
50% are in downtrends. Further, a summary of our measurements of internal market
strength suggests there may not be a definitive change from the current
stalemate any time in the immediate future.
“Regarding momentum, during most healthy market advances, approximately
75% to 80% of stocks quickly rise above their 30-day moving averages. In the
present rally, only about 53% of stocks are still above their 30-day moving
averages. That compares with 77% in mid-March and 71% in mid-May. This loss of
upside momentum suggests investors should cut out stocks that are unable to hold
above their 30-day moving averages.”
Frank Gretz, Market Analyst, Shields
& Company: “Aside from its momentum, there have been some other
impressive aspects of the recent two-week rally. On the NYSE, 51% of all stocks
are above their 200-day moving averages versus just 30% in mid-April. This
continues the improvement in the ‘average’ stock versus the improvement in the
stock average.”
“From a sort of micro standpoint, the recent rally, with a few flaws in
terms of volume, has been impressive. From a macro standpoint, it’s a bit hard
to believe. For example, while the momentum, breadth, and price magnitude of the
rally was impressive, one might ask where the money came from. Mutual funds have
near-record little cash, fund buyers seem to have walked away, and margin debt
is fairly well strung out. Yet, it takes money to do the numbers we’ve
seen.”
“Perhaps it’s about the lack of IPOs, that is, supply. Or, maybe it’s
just about markets. It’s often hard to rationalize important market moves. For
the most part, it’s just better to look. In this case, it’s probably just better
to look for another up day with good volume, and then, another day after that.
It’s a bit hard to believe there’s still money out there, but if there is it
will show up in the numbers, market breadth and volume.”