Todd Market Forecast 6/30/6

Todd Market Forecast Stock Market Update for Thursday 6/29/06
www.toddmarketforecast.com
Available Mon- Friday after 6:00 p.m. Eastern, 3:00 Pacific.

DOW + 217 on 2250 net advances
NASDAQ COMP. + 63 on 1800 net advances
SHORT TERM TREND Bullish

INTERMEDIATE TERM TREND Bearish


STOCK MARKET ANALYSIS:

We have been saying that we would move back to a short term buy signal if the S&P 500 closed above its previous peak of 1256.16 which would give a high above a previous high on the charts. It certainly did that today and it did it on solid volume.

We aren't going to give buy parameters for the SPY or QQQQ right now because, in spite of the strength on Thursday, there are a few caveats. First, the put call ratio was quite low by recent standards and even though this indicator has had its problems lately, readings below .80 have tended to occur near short term tops in recent months. Today it closed at .65. We may look at the SPY and QQQQ on a pullback.

We are also a bit concerned that the market has had a tendency to drop off in the days after a Fed rate hike, if it has rallied prior to the hike. In addition, some indicators have moved to a short term overbought status.

Some were attributing the rally to a change in the Fed statement that accompanied its expected rate rise and certainly the market jumped just at the statement was released. We looked at the wording and indeed there were some changes, but it looked substantially the same. Some said that there was a hint of a pause in the rate increases, but they have better eyes that I do. Perhaps there was relief that the FOMC meeting was over without any negative surprises.

We think that the rally was a combination of the recent oversold condition and the end of quarter influence that frequently causes a lot of portfolio adjustments by institutions. For instance, a number of managers may have had a lot of cash on hand from selling into the recent decline and felt the need to be fully invested for the impending quarterly reports. Many have mandates to be 100% invested at all times.

Regarding the intermediate term, we haven't reached the 50 level on the five week RSI that will be required to generate a buy signal. Today it closed at 46.86. Another rally tomorrow could do it. Once these signals are generated, they tend to be good for several weeks. Stay tuned.


NEWS AND FUNDAMENTALS:

First quarter GDP was revised upward to a final read of 5.6%. This was in line with expectations. The chain deflator, which measures inflation came in at 3.1%, this was less than the expected 3.3%. Initial claims came in at 313k which was higher than the expected 310k.

On the stock front, McDonald's was upgraded by Merrill Lynch and gained 5%. Faro Technologies and Monsanto beat estimates and rallied 19% and 8%. Nasdaq Stock Market was upgraded by Thomas Weisel and jumped 8%.

On the negative side, Advanced Auto Parts guided lower and sank 17%. American Greetings, Micron Technologies and Red Hat came up short on earnings and lost 13%, 6% and 8%.


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 buy for gold as of June 21.

We are neutral on crude oil as of June 1

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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