Todd Market Forecast 7/19/6

Todd Market Forecast Stock Market Update for Wednesday 7/19/06
www.toddmarketforecast.com

Available Mon- Friday after 6:00 p.m. Eastern, 3:00 Pacific.

DOW + 212 on 2400 net advances
NASDAQ COMP. + 37 on 1600 net advances

SHORT TERM TREND Bullish

INTERMEDIATE TERM TREND Bullish

STOCK MARKET ANALYSIS:

The Dow was already up 50 points before the text of Bernanke's speech before Congress hit the wires so there was already some buying going on, but five minutes after the comments were released, the Dow moved up another 80. From there it was up and away.

Bernanke stated that the economy should cool and inflation should moderate. He also said that the full impact of previous rate hikes had not been felt yet. Finally, he promised that the Fed wouldn't panic if inflation surged temporarily. This was probably the reason that the market ignored a higher than expected core CPI.

Back on June 29, we had another 200 plus day for the Dow, but the market peaked two days later and soon gave

back all the gains and then some. We don't think that will happen this time however. There are several differences.

First, that earlier rally didn't start from an oversold condition. Also, the FOMC wording that triggered the surge were much more vague than what we heard today. At that time, all they did was move a couple of commas around and we stated at the time that we didn't understand what the euphoria was all about. Today, the message was clear. Bernanke is looking for ways to stop the cycle of rate increases.

The action on Wednesday wasn't just from the prospect of an end to rate increases, profits, after initially disappointing, finally are starting to come through. Our best estimate is that the summer rally is finally getting underway, but events in the Middle East could still cause trouble and we believe that lower lows will still be seen into October.


NEWS AND FUNDAMENTALS:

The core CPI rose 0.3%. The expectation was for a rise of 0.2%. The headline number was 0.2% which was in line with expectations. This is the fourth month in a row that the core number has exceeded expectations. June housing starts dropped 5.3% to 1.85 mln. The consensus was 1.90 mln.

On the stock front, IBM, JP Morgan and Keane Inc. beat estimates and rose 3%, 6% and 14%. Ditto for Amphenol Corp., A.O. Smith and Datalink which added 7%, 5% and 12%. EchoStar was upgraded by Citigroup and gained 3%.

For the first time, there were no significant declining issues that we are aware of.

BOTTOM LINE:

Our S&P and NASDAQ intermediate term systems are back on a buy signal as of July 3rd. Mutual fund investors are 100% long in the stock fund of their choice.

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 for the Euro as of July 17.

We are on a sell for gold as of July 17.

We are on a sell for crude as of July 17.

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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