Rest Stop Ahead
The Dow gained 191 points while the Nasdaq NDX advanced 44 points. A good bounce fueled by expiration exuberance which normally leads to a hangover Monday morning. 27 sectors were up and 7 were down. Despite a gain in the indices Action for the week was minus 28. This generally means the rally wheels are slipping.
I like what I see in terms of Sector rotation out of Oil and into more growth and technology. It has been a long time coming and there have been several false starts. Even with last weeks super earnings report Apple AAPL is nowhere near its high for the year. The stock market is in “Show Me” mode waiting on solid earnings and wanting more evidence the FOMC will allow growth to develop a head of steam.
Rydex funds- Took a small short position in the Dow last week looking for a small pullback.
Short term - Very Overbought
INTERMEDIATE TERM TRENDS
NDX, DJIA, SPX -- Up
INTERMEDIATE OSCILLATOR
Overbought Sell July 13th
We will see how much the rubber band needs to come back.
Biotech BTK- Still at the top rank with continued strength in Amgen AMGN,
Genentech DNA and Invitrogen IVGN. This sector is prime for some profit taking this
week.
Housing HGX- Despite signs the housing market has stalled the home building stocks
continue to go up. They will do whatever it takes to move their inventory including offering premium upgrades for base prices. This puts pressure on individual sellers and small builders first so the big builders may indeed have several more record earnings reports. If the HGX index falls out of the top ten rank like the Oil Patch did last week the shorts will start gnawing on these stocks.
Cyclical CYC - Moved up nicely in overall rank last week led by Hewlett Compaq HPQ
and Motorola MOT. Caterpillar CAT is also very strong and probably what you think of when you think of a cyclical stock. CSX Rail is also in the bullish mix.
We are hopeful the transition to growth sectors will take place this go around and will lead the market averages to nice gains for the year. We could very well just be watching a shell game as investors sell the overvalued Oil patch and buy undervalued technology stocks. It still pays to think of the market being in a trading range, albeit a positive one, rather than a break out Bull market.
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