Summer Rally?!
The Dow closed down 41 points while the Nasdaq NDX fell 18 points. 4 sectors were up and 30 were down. Action for the week was minus 621. Action was only slightly positive the previous week indicating the enthusiasm was slipping going into last week.
Trends now show negative but flat is still a more accurate description. The Oil Patch is still mostly in the top ten rankings but slipped in relative rank and price last week even after Fridays big up day. As noted last week it looks to us as though the oil stocks have topped out and may be rolling over. There is not a lot of selling and perhaps zero short selling as these sectors have been strong for so long they must be held. Unfortunately when the oil patch is strong the rest of the market is generally weak.
On the positive side for the markets the Broker Dealer XBD, Biotech BTK and Disk
Drive DDX indices are very strong. We have never seen a major market decline when the XBD is in the top ten ranking. Biotech and Disk Drive tend to be leaders of the Nasdaq which bodes well for growth stocks.
Rydex funds- Long the NDX short the Dow Jones with a heavy Pharmaceutical component.
Short term - Neutral
INTERMEDIATE TERM TRENDS
NDX, DJIA, SPX -- Flat to down
INTERMEDIATE OSCILLATOR
Oversold Buy August 10th
Cable and Media SCQ- Jumped up to the top ranked sector with MGM and spanish radio station owner Emmis EMMS leading the way.
Oil patch XOI,OSX, XNG - The Oil patch was down big last week even with Fridays up
move as it tested support. We think there is further downside testing to come as the
stocks (not oil) have been flattish for months now.
Broker Dealer XBD- Solidly in the top ten which is usually good for the overall market. We have generally favored Legg Mason LM and Goldman Sachs GS.
Pharmaceutical DRG- Was already in the bottom ten ranking and fell further with Mercks MRK huge verdict Friday. Because there are so many drug stocks in the Dow Jones average we feel they will drag down the average. The liability cloud is likely to hang over this sector for sometime to come. Real advances in medicine are coming from the biotech sector as pharmaceutical remedies stretch the boundaries of effectiveness and dangerous side effects.
Banking BKX- Bank stocks found support last week. Further buying in this sector would reflect a feeling that interest rates will level out and the economy will remain strong. Many of these stocks have attractive dividends as well.
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This report is for educational purposes only and do not constitute "investment advice".
