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Saturday, September 09, 2006

Irregular Upmove

Rehash of an article by Gary Kaltbaum last Thursday entitled "Why I Think Yesterday May Have Been Important". It outlines the irregularity of the recent upmove in the Dow and S&P, with important sectors not budging. This highlights the importants of sector analysis in stock trading... the individual sectors will give you the most important signals about the general market and how you should trade consequently.

TERENCE

Wednesday's action was the first distribution day since the August 15th follow through day. Normally, I would tell you that one distribution day is not the end of the world...normally! But there has been nothing normal about the recent rally. In fact, I believe it has been a "less than meets the eye" rally. The dirty little secret is that the Dow and S&P have masked very poor action in many important areas of the market. The RAILS have not budged. The TRUCKERS have not budged. BIOTECHS have not budged. The AIR FREIGHTS have not budged. The RETAILERS have not budged. HOUSING is now breaking new lows. The DISK DRIVES hardly budged and are now gagging badly. The BROKERS have lagged. The LENDERS are acting like the RED SOX. COMMODITY stocks have just stayed in range...and most importantly, the SMALL CAP and MID CAP INDICES have lagged badly. All this while the Dow and S&P were close to cycle highs. Keep in mind, since May, we told you the Dow and S&P would outperform during this time.

I am now seeing tops in names like NOKIA, XILINX, TEXAS INSTRUMENTS, LAM RESEARCH and a bunch of TECH names...on the first bad day we have had. This could be meaningful. Why? Because if TECHNOLOGY and more specifically, the SOX tops...well, I don't need to tell you my thoughts. The SEMIS are vital to the health of the market and they may have just put in the high of this latest move. One day is just one day...but in the context of the past few months, it may just be an important day.

Other notes:

My thesis on OIL and OIL STOCKS may just be coming to fruition. OIL prices continue to head lower and OIL STOCKS are now plunging. This now includes some of the bigger cap names like COP, MRO, OXY and XOM. Remember, a break of $130 on the OIH and good night.

WORLD MARKETS may have also just topped. This has to be watched closely because WORLD MARKETS joining in to any downside would be a confirming negative.

SHIPPERS have now topped also. This group has been acting well for the better part of 3 months.

Friends, it could just be an interesting September...and oh yeah...the FED says everything is just fine.

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