Monday, July 16, 2007

Quiet Consolidation

The market kicked off a busy week by lazily digesting last week's gains on quiet trade.

NASDAQ volume actually ticked 4% higher, but Monday's fractional loss and below-average trade avoids qualifying the action as a distribution day.

Leading stocks concur, as the IBD100 slipped just 0.6%, while stocks under accumulation and distribution were evenly matched at 17 each. Even on a down day, the IBD100 saw an impressive 37 new highs. This is a clue that, for now anyway, this market isn't finished moving higher.

You'd get no argument from the Dow. Industrials are on a tear, and Tuesday's strong Empire number kept the heat on the Dow. Not only did it close 0.3% higher to a new, all-time record, INDU came within 11 points of tagging 14,000. Round numbers tend to have psychological importance, but 14k isn't a particularly important technical level.

The NASDAQ is just barely within its Bollinger bands and is still perched a feisty 1.4% above its 13-day. It's common in this situation for institutions to sit on their hands and let stocks slide back into the net. INTC and YHOO both report AH on Tuesday, which is as good a reason as any for more consolidation.

However, Tuesday's PPI and factory numbers -- as well as OE -- are wild cards that could push stocks vigorously in either direction. Data risks aside, the NASDAQ itself continues to offer few reasons for concern.

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In another sign of a market not ready to go down, Technology, Cyclicals and Transports all joined the Industrials in ticking up to new highs on Tuesday. This could be a setup for some grand, sell-the-news tumble, but the fact that these influential sectors are hunting in packs is encouraging.

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As the week progresses, it's unlikely that the market will remain as dull as it was today.

-- On the data front, we see PPI, CPI, Housing, Unemployment and FOMC Minutes.

-- On the earnings front, we get scads of reports from the financials, as well as the first dose of bellwether tech: INTC, YHOO, EBAY, JNPR, AMD, GOOG, MSFT and SNDK.

Toss in OE, and investors could see some volatile, peppery action over the next four days.

Until then, have a great evening.



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