Aces back to back
The Dow ended the week down 585 points while the Nasdaq NDX fell 79 points. The
market finally recognized the risk we had pointed out for weeks. The Russell index RUT
once again was the worst performer. Overall Sector Action for the week was only minus
2572. All Sectors were down.
While the big down days last week garnered the headlines readers of this market
commentary were forewarned of the risk a few weeks ahead of the tumble. In particular I
noted that while the Dow Jones was moving up to 14,000 market breadth and the broader
based Russell index had already topped out. In addition our stock holdings had been
trimmed to barely a handful as we took profits and were not finding any buys to replace
positions over the last month. The indicators which pointed out the high risk condition
a few weeks ago are saying it is time to put some of that cash to work.
Rydex Alerts- Took profits in Bearish Dow and Russell positions we had held for weeks and
flipped to Bullish.
Short term Trading indicator- Very oversold waiting for positive market breadth to confirm a
Buy signal.
INTERMEDIATE TERM TRENDS- Mostly Flat. The Nasdaq NDX and Dow Jones are still in
up trends.
INTERMEDIATE OSCILLATOR - Overbought sell June 13th now very oversold equaling the
March 5th low.
Disk Drive DDX - Number one in overall rank. Sandisk SNDK is a strong buy.
Networking NWX, Technology TXX and Wireless WMH- Refreshing to see a good
number of tech sectors in our top ranks. These should bounce back the most and the
fastest. We bought the Ultra Bullish Technology ETF Friday ROM.
Oil Service OSX- Also ramped up in rank last week during the decline. Took profits in the
bearish ETF DUG and purchased the Bullish ETF DIG.
Housing HGX - The home building companies have been swallowing the bitter pill of the
housing slowdown. While the index was down in price last week it rose in relative rank.
These public companies have become much more adept at adjusting to current housing
market conditions - much more so than individual home owners or local builders. These
are getting to be good buys in the current fire sale.
Broker Dealer XBD- Last week I said it would be difficult for the S&P indices to hold
recent highs unless the financial sectors held. They did not and the market did not. The
XBD will be a fair bellwether as to when the sub-prime concerns subside as well.
Aces back to back- The best two cards a poker player can have and a strong buy on the
market according to my old friend Jim Yates.
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