Date: June 29, 2008
Charts provided by Bigcharts.com
Fundamental Data provided by Investors Business Daily
F.I.T. STOCKS
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Market Update
MARKET HEALTH: Market in CORRECTION! BEARS ARE ON THE MOVE!
Right now you should be converting to CASH as the best way to protect yourself if we head further south. If you are not in CASH, monitor your stocks closely for price and volume movement.
The NASDAQ's new rally attempt was hanging on by a thread and now that read has snapped. All three of the major indexes have now FAILED on their new rally attempt that started June 12. The market health remains in CORRECTION MODE!
The major indexes took a beating this week as the DOW nose dived 4.2%, the NASDAQ fell 3.8%, and the S&P lost 3%. Meanwhile crude oil closed above $140.00 for the first time and finished with a gain of 3.6% for the week.
The Headlines
In the news three major headlines seem to be the catalyst to drive the stock market down: When Crude Oil rises the markets head south, when credit woes and write down worries hit The Financial Sector, financial stocks get slammed bringing the indexes along with it, or when Inflation worries rise people stop spending money on unnecessary items and less spending equals slower growth for the economy.
Crude Oil jumped as high as $143 for the week, but closed the week just over $141. The news wires reported that Libya was thinking of cutting production because they felt there was sufficient global supply. To make matters worse the OPEC President feels oil prices could march as high as $170 this summer. Time to go buy a BIKE!
The Financial sector got slammed this week, thanks to some downgrading by Goldman Sachs, and investment bank stocks suffered the consequences. Washington Mutual dropped 9%, Discover Financial lost 8%, Merrill Lynch 7%, and Citi fell 6%. Goldman Sachs stated that they expect more write downs to occur in the second quarter of $4.2 billion in Merrill and $8.9 billion in Citi. Goldman even rated Citi a "conviction sell", whatever that means, but obviously it convinced people to dump the stock.
Inflation worries will still be a major concern as gas prices rise. As people become stingy with their budgets, less spending will occur, this means slower growth for businesses.
What to do now?
Stay focused on the daily movements of the major indexes. Protect yourself by moving into cash in your equity stocks. Some of the F.I.T. Stock recommendations have held up well like MUR, FLIR, and TITN, but this does not mean they will continue being strong. Equities tend to follow the direction of the markets, so if the markets continue heading south the above stocks will eventually follow the markets lead.
Market corrections are very healthy as it allows fundamentally strong stocks to build new bases. These are F.I.T. Stocks we need to keep on our radar as they will be the first to explode with profits when the market starts to rally once again. The market will rally once again, it always does, it is just a matter of when. We need to be ready. Prepare by monitoring the daily price and volume movements of the stock exchanges. Early signs of accumulation in the markets will give us small investor's hints that the Big Investors are getting back involved in the equity markets. The Big Money, with their high paid analysts and fountains of economic information, will know way ahead of time when Oil may be topping out and when the Financial Sector is starting to firm up their balance sheets. By monitoring the daily activity of the major indexes we will pick up early signs of a market bottoming out and be ready to ride the new wave up.
Now is a great time to review your investment plans, study your investment journals and hone your investment skills. Analyze the trades that went well for you and the ones that did not work out so well this is what HEALTHY INVESTORS do.
Let's take a look at the Charts from last week.
6 Month Chart with Daily Price Bars.
NASDAQ
The NASDAQ failed to confirm its rally attempt and now follows suit with the S&P and DOW. The second white arrow indicates the drop below the low of the first days rally attempt. We would expect that the NASDAQ may be heading south to test the lows it reached in March. However, we are currently reaching oversold conditions so we might get a little bounce next week, and then expect to go lower.
S&P 500
The S&P has spent the last month and a half retreating lower and now rest just above a major support level at 1275 (yellow line). We would expect a little bounce off this level as the S&P has reached oversold conditions. The important thing in the S&P is to watch this 1275 level to see if it can hold the support in the next couple of weeks. If it does not 1200 will be our next test of support.
The Dow Jones
The DOW has obviously broken through its last level of support at 11,500 on big volume. This is not a very good sign from the DOW. We would expect that soon the DOW will bounce and hit its new resistance or roof of 11,500 before heading lower again. It is most likely that the DOW will be heading to the 11,000 level in the near future where it should find its next area of support.
Top 10 Industries:
- Oil and Gas US Explor. and Prod.
- Energy - Other
- Steel Producers
- Oil and Gas Drilling
- Oil and Gas Cdn. Explor. Pro.
- Metal Prdcts. Distribution
- Oil and Gas - Field Services
- Chemicals-Fertilizers
- Oil and Gas Machin. Equip.
- Oil and Gas US Royalty
