Chart Courtesy of StockCharts.com
The book to bill ratio, the benchmark for the sector, which measures demand for chipsended the year flat, showing some improvement, but not predicting a great future.
At the center of the decline has been the flattening out of the PC market, and the lack ofuniversality for other popular products such as MP3 players, which although popular, haveyet to reach the nearly complete market penetration of the PC.
For fans of the chip sector,the key is to watch what happens near the 500-550 area on SOX. To be sure, there might betrading opportunities in the sector, but, a long term sustainable move would have to takeout the resistance in that trading range.
Draggy Drugs
Another perennial winner for the decade of the 1990s was the Amex Pharmaceuticals Index(DRG, below). The index houses some of the biggest corporate names in the world, such asPfizer (NYSE: PFE). But name recognition has done little for the sector lately, ascompetition from generic drugs and increasing pressure from the government and the publicon drug prices have cut into profit margin growth.
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
The Wilderhill Clean Energy Index remained above 180.
Chart Courtesy of StockCharts.com
Crude oil prices are still above the $58-$60 area. The situation is fluid here, though, astightening supplies and the potential for a cold weather surprise could move the market.
Chart Courtesy of StockCharts.com
The Philadelphia Oil Service Index (OSX) is still testing the 200 area.
Chart Courtesy of StockCharts.com
The Amex Oil Index (XOI) broke below 1200 on 12-22, and remained below the key chart pointon 12-26.
Technical Summary:
Chart Courtesy of StockCharts.com
One Day Wonder?
Stocks limped into the finish line on 12-28, but could get a big boost to start the newyear.
To be sure, a rally on the first trading day of the year is almost guaranteed. So twothings are important.
First, you want to see the day end up on a strong note. And second, you want to see thegains extend into the rest of the week and the month.
That means that the action over the next few days will be very important.
That also means that the economic statistics out this week will play a major role in whatthe market does, with the employment report on Friday gettin gthe big headline grabbingopportunity.
Technically, the market is in decent, but not great shape with market breadth holding updespite a weak December.
Indeed, the bull isn't quite dead, and is more sleepy than wounded.
Nevertheless, it's still time to be very careful in this market, as there are still toomany end of the year maneuvers being put to play by traders closing books, and end of theyear seasonal players.
Caution is always part of a successful investment plan. And after six months of aggressiverallying, any market becomes vulnerable, with one or two more days of heavy selling oftensignaling the end of the bull run.
Our long term forecast remains upbeat, unless the major indexes fall convincingly belowtheir 200 day moving averages.
What To Do Now
It's still time to be very careful. Aggressive traders should start looking for short salecandidates, as less aggressive traders look to take profits and wait to see what happens.
We have several open short positions now. Visit all our pages for more details.
Our bond, energy, gold, and dollar timing models have all been updated and should bechecked regularly for trading opportunities.
Visit our individual sections, both our ETF and individual stock picks daily for newideas, and changes to open positions.
Be very methodical about monitoring portfolios, adhering to trading rules, and ratchetingup sell stops is clearly still here.
If the rally turns south, your chances of preserving your profits by following a soundtrading plan, such as outlined above will increase.
Second guessing decisions, and hoping that things will turn out o.k. in the long haul, isthe recipe for disaster at a time like this in the market.
Check all our sections daily. See tech, biotech, Fallen Angels, and timing systems forthe latest adjustments. Our ETF trading systems for energy, Spyders, Small Caps, andtechnology have also been updated.
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
Hindsight is 20/20 to be sure, but the Diamonds were remarkable in 2006, delivering anifty 15.75% return for the year.
Much of the gain came from Microsoft, yet another surprise as the stock delivered a 38%gain after bottoming in June.
Microsoft, before June, was a big loser, which was a good setup for nice gains.
But because of the Dow's great performance in 2006, there are few big losers left in theindex.
That means that any big rally will lead to the index becoming overextended and ripe for afall at some point in the future.
The bottom line is that the Dow is not a place for value investors, but might be a placefor momentum traders.
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
Small stocks are volatile, but remain near all time highs.
