Todd Market Forecast Stock Market Update for Tuesday 6/20/06
www.toddmarketforecast.com
Available Mon- Friday after 6:00 p.m. Eastern, 3:00 Pacific.
DOW + 33 on 450 net declines
NASDAQ COMP. - 3 on 300 net declines
SHORT TERM TREND Bearish
INTERMEDIATE TERM TREND Bearish
STOCK MARKET ANALYSIS:
One of the dumbest comments that I have heard repeatedly over the past several months is that the new Fed chairman must impress the markets with his inflation fighting resolve. No! No! No! The markets don't want an inflation fighter, they want easy money.
Let's look at some facts. Every new Fed chairman has felt that he must impress the markets. Alan Greenspan entered the fray in June of 1987. Four months later in October the Dow was so impressed that it dropped 20% in one day.
By common consent, the most fearsome inflation fighter was Paul Volker who so impressed the markets that the S&P dropped 12% three months after his appointment as Fed Chair and another 20% four months later.
His predecessor G. William Miller had the most benign introduction. The S&P dropped 14% in October of 1978, but it was seven months after he took power.
Arthur Burns entered the scene in March of 1970 and was greeted with a 22% decline one month later.
So far, Bernanke has been greeted with a 7.6% drop in the S&P 500 after four months and this is the most benign decline yet, but stay tuned. If he is as tough as he seems, we could be in store for a lot more on the downside. It does indeed appear that the markets tend to greet new Fed heads with a razzing.
Today the Dow was up almost 90 before giving most of it back. The market looks to be somewhat lethargic. We think that it is a negative that the Nasdaq and the high techs, after foreshadowing this decline, are still lagging. We also are unimpressed with breadth which is lagging badly.
NEWS AND FUNDAMENTALS:
Housing starts rose 5% to 1.95 mln units annualized. This was above the expected 1.87 mln. Building permits dropped 2.1% to 1.93 units which was less than the consensus 1.95 mln.
On the stock front, Cosco gained 3% after an upgrade by JP Morgan. JetBlue jumped 6% after Morgan Stanley initiated coverage with an outperform. JM Smucker and Kroger rose 7% and 5% on earnings.
On the negative side, Apollo Group and Actuant Corp. beat estimates, but still lost 6% and 19%. Trident Microsystems sank 9% after Piper Jaffray lowered its price target.
BOTTOM LINE:
Our S&P and NASDAQ intermediate term systems are on a sell signal as of June 7, 2006 at 1256 on the S&P 500. Mutual fund investors are currently 100% in cash.
Short term traders in the SPY and QQQQ are in cash. Stay there for now.
For new subscribers, the QQQQ and SPY are exchange traded funds or Spiders. The former mimics the Nasdaq 100 and the latter mimics the S&P 500. ---- Additionally, an m.i.t. order means “market if touched” It means that your order becomes a market order if the price is touched.
OTHER MARKETS
We are on a buy for the bond market as of May 19.
We are on a buy for the greenback and a sell for the Euro as of June 8.
We are on a sell for gold as of May 15.
We are neutral on crude oil as of June 1st.
We're now on a long term negative for all major world markets, including those of the U.S., Britain, Canada, Germany, France and Japan. This is a first in many years, but it should be a fairly short time frame, meaning a few months.
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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