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Jul 16, 2007 - Issue #067
Onward and Upward?
Dow score card for the week ending 7/13/07.
DJ-30: 13907.25 +295.57 +2.17%. In the Real World: 57.03 +1.21 +2.17%.
UP: 27, Down: 3.
Trends (weekly): This is the subjective part.
Rising 21 (+5) 70%:
+*AA, AXP, +*BA, CAT, +*DD, +*DIS, GE, GM, HD, +*HON, HPQ, IBM, INTC, JPM, MMM, +*MO, T,
UTX, VZ, WMT, XOM.
Consolidating 7 (-4) 23%:
AIG, +*JNJ, -*KO, MCD, MRK, MSFT, PFE.
Declining 2 (-1) 7%:
+/- denotes change of direction.
* denotes change of category.
Onward and Upward?
From the above stats, it would seem obvious that the resumption of the, to use Larry
Kudlow's (CNBC Kudlow & Company) expression, "Goldie Locks Economy" is alive and well.
Maybe it is. But don't confuse the economy with the stock market. They're two different
While the market did, in fact, explode to the upside on Thursday, no small amount of the
buying was "short covering". Those "shorts" are now out of the market. They've "covered".
Unless they bought from new short sellers taking their place, the "open short interest"
is greatly reduced, to say the least.
Or did they cover from "longs" cashing in? Even if the "shorts" reversed and went "long"
where was the "follow through" the next day?
From the sheer power of Thursday's move, one would have expected more the next day,
wouldn't one? Instead, what did we get? A fireworks "fizzle"? Where's the meat?
One attractive CNBC anchor was moved to say to a colleague, "I don't want to hear any
negative arguments right now, just let us enjoy our little moment in the sun!" Wow! Such
It reminds of one whistling past the cemetary at night trying to convince themselves,
"I'm not afraid, I'm not afraid!"
What do we do Monday morning? Raise protective stops to just underneath the most recent
significant lows on the weekly charts, at least.
If this is a continuation of the uptrend, fine. If not, let the market take you out.
Another time-tested strategy is to take some money off the table by lightening up your
positions (see Learn to Trade/ When to Sell).
On the daily charts GM, on a gap up on 6/28, formed what eventually became an "island".
This is usually ominous. The gap has filled. I would expect a down move to follow.
Comments? Ideas? Feedback? Let me have it, right between the eyes! I'd love to hear from you. Just reply to this zine and tell me what you think!