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Tuesday, August 31, 2004
Good evening friends,
Market Recap
Folks, this market is insane. I can think of no other words to describe the illogical action we are seeing. Yesterday all three indices closed at the low of the day. Today they started out red and came back to close at the highs of the day. Bad news is coming out in droves, yet the market shakes it off and ignores news such as bombings in Russia, people killed in Iraq, and lower than expected economic numbers. This news all hit the wires today but the markets stead fast and moved up. Totally illogical action and its troubling when charts do not act as predicted based on historical price patterns. Today the Dow is up +51 points, the NASDAQ is up +2 points, and the S&P is up +5 points, all three closed at the highs of the day. This would usually indicate that tomorrow will be an up day at least at the open, but in this market it is hard to say with much certainty.
Market Conditions
For the past couple of weeks I have been saying to be extremely cautious about this market and its latest upward movement. With the volume lacking, there has just not been any reason to be optimistic. There was a bit of an extended technical bounce that brought out a handful of buyers who thought there was a bottom and were trying to beat the markets to the punch. After some recent economic news, I think those traders who jumped the gun will be the ones to get beaten down. With all the bad news out there, I just cannot find a reason to be long the market.
Consumer confidence numbers plunged in the latest poll. They were predicted to drop slightly but fell from 105 down to 98. The forecasted decline was down to 103, so that is quite a surprise to the downside. Also, the PMI index declined more sharply than predicted. Falling from 64 down to 57, the forecasted decline was 60.
There has been a recent increase in violence around the world. A bomb in the Russian subway system, two bus bombings in Israel, and 11 hostages killed in Iraq, all in one day. Just a few days ago explosives were found in the wreckage of the two Russian planes that were downed. Clearly the level of violence in our world is on the rise.
The drop in oil prices to under $42 may have caused today's rally. It may be that the decline in the price of oil prevented a significantly larger fall than we may have had in light of all the bad news. Plus the fact that volume is anemic in all the markets is a sign to stay cautious. If volume was normal levels in the market and the market were moving up, I would be more impressed with the action.
Stocks cannot rally and sustain an increased price level if volume is not there, it just does not happen. I am sure there are quite a few adventurous people in the market who will get suckered in by the recent rally in stocks. It is just like the market to chew up and spit out investors who do not know about technical indicators. One of the easiest indicators to use is volume. A simple check of volume would prevent a number of people from falling pray to this recent rally that is sure to fail.
OTC BB Watch List
- IBAS (nice flag forming, due to breakout soon)
*Note, Here are a few stocks I found that look decent for moves higher. Normally I would add to the bulletin but I am holding off adding anything for now. Take a look if you would like.
Long: BLKB, TOPT, SRTI, DITC, ELOS, and TRA
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