Todd Market Forecast Stock Market Update for the close on Thursday 04/21/05
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Available Mon- Friday after 6:00 p.m. Eastern, 3:00 Pacific.
DOW + 206 on 1600 net advancing issues
NASDAQ COMP. + 49 on 1400 net advancing issues.
STOCK MARKET ANALYSIS:
Amazing. Yesterday, the stock market took a pretty good hit on inflation fears. Today, it is no longer afraid of inflation. Seriously, though, a severely oversold market got some good news on the economic front and very good news on the earnings front. The result was the best one day rally since 2003.
From a technical analysis standpoint, there was very little to dislike about the action on Thursday, but the thing we liked the most was the chart pattern for the S&P 500. Yesterday it broke down and made another low below a previous low. Today, it moved above a previous high. We have found that a reversal this rapid is normally a precursor of further upside.
We also liked the fact that the Nasdaq has been outperforming the listed market for the past several days and in yesterday's selling, held above it's low of April 15, unlike the S&P 500 or the Dow. From a sentiment standpoint, the put call ratio has been sky high and the Rydex Nova Ursa ratio is at levels normally associated with bear market bottoms.
We are still haunted by the fact that the first quarter was negative, but we feel good enough about the current market situation to move back to an intermediate term buy signal. We discuss this in the "Bottom Line" section below.
NEWS AND FUNDAMENTALS:
Initial claims came in at much lower than expected 296k. The consensus was for a reading of 329k. It was the biggest drop in 3 years. The Philly Fed Index was a very strong 25.3 in April, up from 11.4 in March and higher than the consensus 11.9. The Conference Board reported that the leading indicators were down 0.4%. The expectation was for a loss of 0.3% so it wasn't all that bad.
BOTTOM LINE:
Our S&P and NASDAQ intermediate term systems have been on a sell signal from the close on February 22, 2005. As of today's close, we are going back to an intermediate term buy signal. On Friday, move back to a 100% invested position in either a growth fund or S&P 500 index fund at your earliest convenience.
QQQQ traders are long from 34.84. Move your stop to 35.00. SPY traders remain in cash for the present.
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 signal for bonds.
We are on a buy for the dollar and a sell for the Euro.
We are on a sell signal for gold.
We remain long term positive on all major world markets, including those of the U.S., Britain, Canada, Germany, France and Japan.
STEVE TODD
About Steve Todd
