Heat Wave
The Dow rallied 351 points while the Nasdaq NDX rose 58 points. Action for the week
was plus 1675 which is pretty positive. All sectors were up except Transportation. While
the markets are still in a trading range I believe we have seen the lows for the year in June
with the successful retest in July. The upside is wholly dependent on Bernanke’s next
move. A pause is in order as the double whammy of higher interest rates and higher oil
prices could tip the economy into recession.
We see clear signs the economy is slowing down. This should effect the demand for oil as
well and we could all use a break at the gas pump. Our sector work suggests taking profits
in oil stocks and buying transportation stocks. Housing and Retail will be the telltale signs
of recession in September. We are overbought in the short term looking for a pause to
refresh in August for the stock market and interest rates.
Rydex funds- In the Bullish
Russell and NDX funds
Short term - Overbought
INTERMEDIATE TERM TRENDS
SPX- Up, Dow- Up SML & NDX - Down
INTERMEDIATE OSCILLATOR
Oversold Buy June 13th
Successful retest July 17th
Pharmaceutical DRG- Number one in overall rank and a bit overbought. Too late to
chase these stocks. In fact it is a good time to take profits and look at the Biotechs which
are playing catch up to the Drugs.
Oil Patch XOI, XNG, OSX- The price of oil seems stuck at $75 and the stocks are hitting
relative highs on supercharged earnings. A good time to take profits in these sectors.
Transportation IYT- In the bottom ranking due to the spike in oil prices. The airlines are
the strongest with Southwest LUV being the best of breed. Expect a buy
recommendation in this sector this week.
Telecom XTC- Led by Ma Bell T the phone companies finally connected with some good
earnings. We already took profits on Verizon VZ in the last run up and would be doing the
same with any of the others you may own. This sector has apparently turned the corner
and is worth buying on dips.
Cable SCQ- Comcast CMCSA and Echostar DISH are the leaders in this sector.
Telephone business is gravy for these operators.
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