How High?
The Dow slipped 25 points while the Nasdaq NDX dropped 11 points for the week.
Action for the week was plus 67. 14 sectors were up while 18 were down. Only six
sectors are in up trends. After finding bottom two weeks ago the stock market is waiting on
the FOMC to see how high they might raise interest rates. Stock and Commodity markets
are saying they have already gone too far.
All the broad based indices except interest rates are in a down trend. This weeks FOMC
decision will determine where the ceiling is in the financial markets and where the floor is
in the Housing market. My guess is the housing market is likely to take the brundt of any
further rate increases and show a real decline this fall. Recent increased sales activity is
due to builders and other insiders increasing incentives which is a code word for dropping
prices.
Rydex funds- Took a market position in the Bullish Russell index fund
which is up about 1%.
Short term - Neutral
INTERMEDIATE TERM TRENDS -- SPX , Dow & NDX – Down
Airlines XAL- Took off in the last few weeks despite high fuel costs. Demand for tickets is
strong and airlines have been able to raise prices. Alaska Air ALK and Continental CAL
are the strongest. Our AMR holding is still a buy.
Oil Patch XOI, XNG, OSX- The Kerr McGee KMG takeover and a stable $70 bbl price
bouys these stocks which are in a nice trading range.
Retail IRH- Fell in overall rank with the expectation that higher interest rates and higher
gas prices will take a bite out of the consumer. Some stocks like American Eagle AEOS,
Kohl’s KSS and JC Penney JCP are near yearly highs and would be attractive on any
pullback.
Banking BKX- Fell in overall rank as the yield curve is flattening and may invert. Our BBT
holding is hanging in there because of a nice dividend.
While our market indicators gave a buy two weeks ago the upside is dependent on the
FOMC meeting results this week.
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