www.toddmarketforecast.com
Todd Market Forecast for Thursday May 19, 2010
Available Mon- Friday after 6:00 P.M. Eastern, 3:00 Pacific.
DOW - 376 on 2850 net declines
NASDAQ COMP - 94 on 2300 net declines
SHORT TERM TREND Bearish
INTERMEDIATE TERM TREND Bullish
The market can adjust to known bad news, but it reacts poorly to uncertainty and there was a ton of that today.
On Friday the Germans vote on the Greek bailout and who knows how it may go. Congress is due to vote on financial regulatory reform and that has the banks as nervous as a cat in a room full of rocking chairs. It seems that lawmakers are more anxious to punish financial institutions than to solve our economic problems.
And something else happened today that was not mentioned at all by the market’s talking heads. The Defense Dept. stated that the South Korean vessel that sank a few weeks ago was torpedoed by North Korea. This is clearly an act of war and the U.S. has a mutual defense treaty with South Korea.
There are also worries about China as an engine of growth. The Shanghai market is down 25% from its peak.
The technical indicators work 90% of the time, but when the market is captivated by geo political events, the technicals don’t work. The same is true for things like earnings. These are simply not what the markets are focused on right now. At some point, technical indicators will start working again. Most likely when investors are thoroughly disgusted with them.
That said, we have remained in the intermediate term bullish camp partly because the weekly charts are still showing a pattern of rising tops and rising bottoms. We should get rid of a lot of the uncertainty over the next few days.
The dollar dropped and the euro rallied, but that didn’t help gold, silver and crude oil. Copper did move higher and bonds rallied.
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BOTTOM LINE:
Our intermediate term systems are on a buy signal.
System 2 traders, we sold the E-mini at 1070.25 for a loss of 42.25. We sold the SSO at 35.01 for a loss of 3 points.
We bought the E-mini at 1188.50 and the SSO at 36.39. Sell at the close on Friday. We generated still another buy at the close on Thursday, but we’ll holler “uncle” for now and stand aside.
System 7 traders are in cash. Stay there for now.
NEWS AND FUNDAMENTALS:
Jobless claims were 471,000, higher than the expected 440,000. The Philadelphia Fed Survey came in at 21.4, about the same as the expected 21.5. On Friday, there are no important economic releases.
OTHER MARKETS
We’re on a buy for bonds as of May 4.
We’re on a buy for the dollar and a sell for the Euro as of March 24.
We’re on a buy for gold as of April 7.
We’re on a buy for silver as of April 1.
We’re on a sell for copper as of April 27.
We’re on a sell for crude oil as of May 14.
We are long term bullish for all major world markets, including those of the U.S., Britain, Canada, Germany, France and Japan.
STEPHEN TODD
A SHORT BIOGRAPHY
Editor and publisher of the Todd Market Forecast, a monthly stock market newsletter with an included nightly hotline.
Steve has published articles on the stock market in the following publications: Barron’s, Stock Market Magazine, Futures Magazine, The National Educator, and others.
His stock market commentary is heard on the following stations: CNBC, Bloomberg, CNNfn, Associated Press Radio, Business Radio Network, CKNW in Vancouver, British Columbia, KFWB, Los Angeles and ROBTV in Toronto, Ontario.
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