Monday, July 03, 2006
At the close on Friday program trading kicked in and a large number of stocks experienced distribution or accumulation. At this point it is difficult to determine. Technically indices are overbought and the 50-day average on the QQQQ could be problematic here as this major market indicator moved up to tag this level before selling down on Friday. This week we could see consolidation where stocks trade sideways or we could see stocks retreat and move back down to test recent lows, keeping the three-week trading range in tact. Oil and metals stocks continue to outperform and pullbacks in these sectors should be considered buying opportunities. We need to be careful with the broader market however until it proves itself. Again, program trading on Friday skewed our recent analysis and that data that we had interpreted as bullish is now in question. Today the market closes early and it will be closed tomorrow. Most traders have taken a long weekend and will not return until Wednesday. We recommend that everyone do the same. It is unlikely that anything meaningful will occur in today's market.