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Apr 9, 2007 - Issue #053
Dow score card for the week ending 4/5/07.
DJ-30: 12560.20 +205.85 +1.67%. In the Real World: 51.52 +0.53 +1.03%.
UP: 23, Down: 7.
Trends (weekly): This is the subjective part.
Rising 12 (+2) 40%:
AA, AIG, +*CAT, DIS, HON, +*HPQ, IBM, KO, MO, T, UTX, XOM.
Consolidating 16 (-2) 53%:
AXP, BA, C, DD, GE, GM, HD, JPM, MCD, MMM, MRK, MSFT, PFE, PG, VZ, WMT.
Declining 2 (N/C) 7%:
+/- denotes change of direction.
* denotes change of category.
The "floor" held. The significant intermediate term trendline dating back to 7/18/06
referred to previously (see Mar 26, Assult Underway) was established during the Tuesday
4/3 session as the Dow broke above the 3/23 high.
The figures in the averages above are slightly off the mark as the week was short one
day due to Friday's close plus this week's figures reflect the Altria (MO) spinoff of
Kraft Foods. I did the best I could with what I had to work with so please bear with me.
The figures will self adjust as soon as we have two full weeks data to compare.
The new significant weekly upward support trendline also reveals, in my judgement, the
exit point if the trendline is violated.
Various brokerage firms chief technical analysts appeared on CNBC stating that, in their
opinion, we have seen the bottom and that the worst is over.
The Art of Contrary Opinion and Tape Reading and Market Tactics cautions,
"When everyone is in agreement, everone is likely to be wrong."
In my judgement, whether the 2/20 Dow high is the top or not is the question that needs
to be answered. The best market analyst is the market itself. Let the market tell its'
The bad news is that the S&P 500 (SPX) index and Nasdaq 100 (QQQQ) have already violated
their significant support trendlines and are in the process of testing their respective
tops. Are they also in the process of 'kissing the top good bye'?
Notice option volatility is back down. Are the market participants too comfortable? Have
they no fear? No man is afraid, until fear visits him. When the market offers cheap
insurance, buy it.
The risk premium algorithm, (see Beating the Dow with Bonds) still favors stocks
over bonds, for now. That could change.
Interpretation: Investors should stick with stocks as long as the S&P 500 earnings yield is
greater than corporate bonds but, since gold is higher than a year ago, be prepared to
switch to US Treasury bills.
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!