Thursday, June 28, 2007

It's So Easy...

On Thursday, Ben Bernanke (not pictured) left rates unchanged for the ninth time in 12 months.

Being the Fed chair is so easy, a c...

Final Q1 GDP numbers offered no cause for alarm Thursday morning, and trading began with stocks drifting higher on light trade. But as expected, chop and slop hit after the FOMC statement. Investors got out their Roget's and weighed inflation adjectives, trying to decide if "persisted" is worse than "elevated" (apparently it is).

However, volume dropped across the board, indicating that investors aren't that worried. Positive market internals actually tipped the so-so action in the bull's favor. It's worth noting that market internals (see charts) are improving after the recent spate of stock weakness.

Leading stocks added to Thursday's bullish bias. The IBD100 gained 0.3% as 51 of 100 stocks moved up, and new highs increased from 5 yesterday, to 17 today. Despite the drop in volume, 18 stocks saw accumulation vs. just 6 being sold. Market internals and the fundamental leadership point to a market prepped to move higher.

Today's NASDAQ candle pattern is a bearish setup, but it tends to have low/moderate reliability. Today's lame volume and the candle location inside the base weaken the gravestone case.

None of the major indexes look great, but for the moment they've stopped getting any worse either. Despite tomorrow's trifecta of quarter-end, month-end and week-end, it's hard to expect anything other than more choppy action -- but I'm willing to be surprised.

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You've got to draw the line somewhere, so I've decided to go with the cheaper model tomorrow.

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It's worth noting that, despite the wild VIX action over the past three weeks, the Put/Call Ratio remained well-behaved. In fact, the TOF Ratio had a positive crossover today, just six days after confirming a Sell. This isn't enough to wave the green flag, but it's a promising development.

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Fed funds have now been at 5.25% for the same length of time that they were at 1%. The rate environment has been stable for many years, and none of the current economic woes -- except maybe inflation itself -- can be tied to FOMC policy. Higher unemployment -- not the housing debacle -- is the one thing with the mojo to budge the Fed lower.

Core PCE aside, Wall Street is now poised to shift its focus to the one thing that really matters: earnings. Epic short interest has a lot riding on bad news, and RIMM won't make their job any easier tomorrow.

Until then, have a great evening.



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