www.toddmarketforecast.com
Todd Market Forecast for Tuesday May 25, 2010
Available Mon- Friday after 6:00 P.M. Eastern, 3:00 Pacific.
DOW - 22 on 970 net declines
NASDAQ COMP - 3 on 1150 net declines
SHORT TERM TREND Bullish
INTERMEDIATE TERM TREND Bullish
We heard an interesting statistic today from Paul Hickey, co founder of the Bespoke Investment Group. According to Mr. Hickey, there have been 9 times that the S&P 500 has dropped more than 5% during the month of May. Following this, the average gain for the next three months has been 12%.
We can’t vouch for Mr. Hickey’s data, but it does fit into our propensity for buying into weakness.
Today, we had another reversal. At one time the Dow was down almost 300 points, but staged a magnificent comeback. We can’t call it a high volume reversal, but volume did increase.
More importantly, we held above the close of Friday, May 21 (arrows) setting the stage for a low above a previous low. We also held the February low after breaking it intraday. In addition, the CBOE put call ratio was 1.14. Readings of 1.10 and greater have a tendency to appear at trading bottoms. We are sufficiently impressed with the tape to move back to a short term buy.
The selling seemed be caused by reports that North Korea was mobilizing its forces. The stock index futures were down sharply before the opening in Europe, but throughout the day, U.S. officials stated that there was no evidence of such activity.
The dollar was higher, but that didn’t hold down gold, but silver, copper and crude oil were lower. Bonds rallied for the session.
BOTTOM LINE:
Our intermediate term systems are on a buy signal.
System 2 traders bought the E-mini at 1046.50. They bought the SSO at 33.51. Sell at the close on Wednesday.
We generated another system 2 buy at the close. Buy the E-mini and or the SSO at the opening. We’ll hold until Thursday’s close unless the Dow is up by more than 100 points at 3:45 EST in which case sell at Wednesday’s close.
System 7 traders are in cash. On Wednesday buy the SPY at the opening. We’ll hold for the day and hopefully for a few weeks. Unlike system 2, this is a more subjective approach.
NEWS AND FUNDAMENTALS:
The Case-Shiller home price index dropped 0.4%, but was better than last month’s drop of 0.6%. Consumer confidence was 63.3, better than last month’s 57.9. On Wednesday we get oil inventories, new home sales and durable goods.
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.
Once per year, in January, Timer Digest editor Jim Schmidt gives the rankings for all services monitored for multi year time frames. We were ranked ranked # 1 for the past ten years at the end of 2003, 2004 and 2005. At the end of 2006 we slipped to #3 and at the end of 2007, we were ranked # 5.
TODD MARKET FORECAST
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