Todd Market Forecast Stock Market Update for Thursday 08/03/06
www.toddmarketforecast.com
Available Mon- Friday after 6:00 p.m. Eastern, 3:00 Pacific.
DOW + 42 on 750 net advances
NASDAQ COMP. + 14 on 250 net advances
SHORT TERM TREND Neutral
INTERMEDIATE TERM TREND Bearish
STOCK MARKET ANALYSIS:
In the early going, interest rate increases in Europe hit a somewhat overbought U.S. market and stocks dropped sharply. Then several things happened. First, The ISM services index and factory orders were both weaker than expected. This suggested to investors that the Fed may pause next week. In addition, the State Dept. said it was hopeful for a U.N. resolution calling for a cease fire by Friday. That's right. Friday.
It's amazing. A weaker economy means smaller profits, but that's not important. The only thing that seems to matter right now is the possibility of a Fed pause in its rate increases. Never mind that the Fed actually lowered the Fed Funds rate by a total of 5 1/2% from mid May of 2000 to late June of 2003 and the S&P 500 responded by dropping around 450 points.
The stock market is like a teenage girl. It's given to fads. In the 1980s everyone used to wait with breathless anticipation for the money supply to be released every Thursday. Now no one cares in the slightest. Don’t try logic on the stock market. Today it welcomed a weaker economy, but it also responded well to the better than expected retail sales. Your best friends are chart patterns, volume and sentiment.
Today we marginally broke out above short term resistance on most indices, but let's see what kind of follow through we get tomorrow.
On Friday, we get the most important and market moving economic release of all. The non farm payrolls. A surprise here can cause some extreme volatility.
NEWS AND FUNDAMENTALS:
The Bank of England increased rates to 4.75% and the European Central Bank increased them to 3.0%. The Institute for Supply Management services index came in at 54.8, down from 57.0 in June making it the third decline in a row. Factory orders rose a smaller than expected 1.2% in June. The consensus was for a rise of 1.7%.
On the stock front, Abercrombie & Fitch, Bebe Stores and Dollar General reported solid same store sales and rose 6%, 13% and 5%. Corrections Corp, Office Max and Sunoco beat estimates and jumped 8%, 13% and 4%.
On the negative side, Cooper Tire, Starbucks and MGM Mirage dropped 8%, 8% and 7% on earnings. Foot Locker. Gap lost 5% and 7% on disappointing same store sales.
BOTTOM LINE:
Our S&P and NASDAQ intermediate term systems are on a sell signal from July 21. Mutual fund investors should be 100% in cash.
Short term traders in the SPY and QQQQ are on the sidelines. 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 buy for crude as of July 24.
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.
RANKED # 1 BY TIMER DIGEST
Timer Digest of Greenwich, CT monitors and ranks over 100 of the nation’s best known advisory services. If you have heard of an advisor, it is likely that he or she is monitored and ranked by Timer Digest.
Once per year, in January, Timer Digest editor Jim Schmidt gives the rankings for all services monitored for multi year time frames. The latest survey has us ranked # 1 for the past ten years.
TODD MARKET FORECAST
P.O. Box 4131
Crestline, CA 92325-4131
www.toddmarketforecast.com
e mail – toddmarketforecast@charter.net
phone 909 338 - 8354
