Todd Market Forecast Stock Market Update for Wednesday 01/31/07
www.toddmarketforecast.com
Available Mon- Friday after 6:00 p.m. Eastern, 3:00 Pacific.
DOW + 98 on 1150 net advances
NASDAQ COMP. + 15 on 350 net advances
SHORT TERM TREND Bullish
INTERMEDIATE TERM TREND Bullish
STOCK MARKET ANALYSIS:
I am indebted to Yale Hirsch of the Stock Trader’s Almanac for the following bit of market history. The Month of January is now in the books and it was an up month. Since 1950 there have been 36 higher Januarys excluding this one. In 32 of those cases, the remainder of the year has been higher. This works out to an 89% batting average.
One of the failures was 1966 right in the middle of the Viet Nam war and another was 2001 which was impacted by 9/11. The January barometer is predicting that by the end of the year, prices will be higher than Wednesday’s close.
Today, kind words from the Fed suggesting that growth is firming, but that inflation is quieting down gave a boost to the stock market. The Dow and S&P 500 are within a whisker of another all time high and of course, many indices are already there.
Bonds also liked the Fed input and rallied sharply. We are moving back to a buy for bonds for the first time since our sell on December 22nd. If we are correct, this should also be an additional boost to stocks. We wouldn’t be amazed by a bit of a pullback on Thursday.
NEWS AND FUNDAMENTALS:
Fourth quarter GDP rose a better than expected 3.5%. The consensus was for a rise of 3.0%. The Chain deflator, which measures inflation rose 1.5%. The consensus was for a rise of 1.6%. The employment cost index rose 0.8%, the expectation was for an increase of 1.0%. The Chicago PMI was a lower than expected 48.8. The consensus was for a reading of 52.0. On Thursday we get consumer spending, Core PCE, ISM and vehicle sales.
On the stock front, Boeing, C.H. Robinson, Estee Lauder and Harris Corp. reported good earnings. The stocks rose 4%, 22%, 15% and 15%. O’reilly Automotive jumped 7% on an upgrade by Credit Suisse.
On the negative side, Allstate had a big increase in earnings, but not big enough apparently. The stock lost 6%. Juniper Networks beat estimates, but still tumbled 9%. SanDisk dropped 6% on earnings.
BOTTOM LINE:
Our S&P and NASDAQ intermediate term systems are on a buy signal. Mutual fund investors should be in a 100% invested position.
Short term ETF traders are in cash. Stay there for now.
OTHER MARKETS
We are moving back to a buy on bonds as of today, January 31.
We are on a sell for the Euro and a buy for the dollar as of December 13.
We are on a buy for gold as of January 23.
We are on a buy for crude oil as of January 23.
We are bullish for all major world markets, including those of the U.S., Britain, Canada, Germany, France and Japan.
STEPHEN TODD: A SHORT BIOGRAPHY
Editor and publisher of the Todd Market Forecast, a monthly stock market newsletter with an included nightly hotline.
Steve has published articles on the 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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