Todd Market Forecast Stock Market Update for the close on Thursday 09/01/05
www.toddmarketforecast.com
Available Mon- Friday after 6:00 p.m. Eastern, 3:00 Pacific.
DOW - 21 on 700 net advances
NASDAQ COMP. - 4 on flat breadth.
STOCK MARKET ANALYSIS:
The stock market digested yesterday's gains and looked quite good internally, as the advance decline line made more progress. The economic news is quite negative right now. New Orleans isn't just another metro area. It is the biggest port, tonnage wise, in the United States and something like 20% of our energy moves through it. Shutting it down is a lot more serious than losing some tourist dollars.
But that isn't what the stock market is focusing on right now. There is a lot of speculation that the Federal Reserve will stop raising rates. It doesn't make sense to us. We feel that the economy is a lot more important than the decision by some bureaucrats on short term rates, but as we have said many times, looking at the economy will mislead you in the stock market. Frequently in the past, it has rallied when things looked bleak and declined when the economy looked good.
This is why we place a lot of emphasis on just looking at the market and its internals. In other words, technical analysis.
Regarding the Fed, we will hear from their comments and speeches which way this is going to come down. If they don't make any comments, it probably means that they will back away in their drive to higher rates and this would be very good for stocks.
NEWS AND FUNDAMENTALS:
The August ISM number came in at 53.6. This was less than the anticipated 57.0 and also less than the prior reading of 56.6. Initial claims were 320k, greater than the consensus 315k. personal income rose 0.3%, less than the expected 0.5% and personal spending rose 0.1%, equal to the consensus.
On the stock front, Archer-Daniels-Midland rose 5% as a result of the oil price hikes. Ann Taylor Stores and Jos.A. Bank added 3% and 6% on good same store sales. The Chicago Mercantile Exchange jumped 8% on vastly increased volume. Del Monte added 3% on earnings. U.S. Steel gained 4% after an upgrade by UBS. Refiners Sun, Conoco Phillips and Frontier Oil gained 5%, 5% and 13% after being upgraded by Lehman Bros.
On the negative side, Children's Place dropped 4% after reporting same store sales. Continental Airlines sank 5% for obvious reasons. Delphi Corp gave up 9% saying that it would consider bankruptcy if union negotiations didn't bear fruit. Dollar General lost 2% on Katrina related store closings. Freddie Mack lost 4% on earnings. GM sank 4% on decreased sales.
BOTTOM LINE:
Our S&P and NASDAQ intermediate term systems are back on a buy signal as of the close on April 21, 2005. Mutual fund investors are 100% invested in a growth fund or S&P 500 Index fund of their choice.
Short term traders in the SPY and QQQQ are long from 121.25 and 38.56. Keep your stops at 120.30 and 38.20.
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 on a buy signal for bonds as of August 23, 2005.
We are on a buy for the Euro and a sell for the dollar since August 3, 2005.
We are on a buy signal for gold as of August 3, 2005.
We remain long term positive on all major world markets, including those of the U.S., Britain, Canada, Germany, France and Japan.
STEVE TODD
A SHORT BIOGRAPHY
Editor and publisher of the Todd Market Forecast, a monthly stock market newsletter with an included nightly hotline. Steve Todd has a degree in history with a minor in mathematics. This should be a good combination for stock market analysis.
Steve has published articles on the economy and 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.
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