With a slew of economic reports, a fed decision and end of quarter trading, it was expected to be a wild week of trading – which it was, with volatile intraday swings throughout the trading week. However, bulls and bears just chased each other’s tails around and the net result was little change for the week.
Sub prime concerns continue to crop up with news of a couple Bear Sterns hedge funds near collapse due to over exposure in the sup prime market. Any additional news about the sub prime melt down spreading to the top of the food chain is a concern that will no doubt be watched closely. My feeling is that it’s going to get much worse before it gets better. Tempering the sub prime concerns this week was another decent inflation reading on Friday with the PCE core deflator rising just .1% in May bringing the year over year inflation reading to 1.9% which is at the top, but within the Fed comfort zone of 1 – 2%. I just wonder when the Fed is going to place more importance on energy and food prices which have typically been excluded due to their volatility.
From a technical standpoint, I’d call the action of last week nearly neutral. On the bearish side, four of five trading days resulted in a close near or at the lows of the day. Several weeks ago, traders were looking to buy the dips, but the theme now is that traders are looking to sell the rallies. On the bullish side, the bears continue to have trouble exerting any kind sustained control as the Dow was able to reclaim support of its 50 day moving average and the Nasdaq continues to hold above that level. All in all, the market seems a bit uncertain about which way it wants to go at this time and you know what that means for you the successful trader.. let it sort itself out without making large bets in either direction. Next week is a holiday week, so don’t expect the market to reveal many clues as to its direction until the following week. If you’re thinking of vacationing for a few weeks and watching the market from the sidelines, now is a great time 🙂 If you are more of an active trader like myself, consider locking in profits a bit earlier and be quicker to cut losses.
Market Action This Week: Neutral
Outlook for the Next Month: Leaning Bearish
::: Model Portfolio Update :::
I’m continuing to remain quite cautious with the model portfolio right now with a sizable portion in cash and the portfolio relatively even in long and short positions. Few transactions were made during the week with 3 positions closed and one new small long position initiated. I closed out my FMCN position for a 17% gain. I hate to close out positions after a big move like it had on Friday, but I did sell near Friday’s high and think it will have trouble getting much higher than that in the coming weeks. FMCN is now trading just above the upward trend line which could indicate a parabolic move from here or indicate it’s overbought in the short term and needs to consolidate significantly. Considering the market is a bit shaky right now and me having some trouble of late locking in some significant gains, I opted to lock in the profit and look for a better entry to reinitiate a trade. On the losing side, I did close out 2 trades in BTJ (a short) and SYNL for losses of 9% and 10% respectively, but both were very small positions, so it didn’t hit the portfolio too hard. The SYNL trade was particularly difficult to swallow because I had a decent gain on the stock before it turned a jeckyl and hyde on me and went from bullish breakout to nine straight days of declines! I rode this one out thinking it would get a bounce at the 50 moving average, but that never materialized and found myself eating a loss. Such is trading. Sometimes the most bullish of charts don’t always act as they should. The good news is that they work more often than not, so that if you keep your losses small enough you can make lots ‘o money over the long haul. For the week, the portfolio was off a bit and the YTD stands at 4.3%, which is still a bit shy of the S&P500 YTD performance of 6%. My goal is to stay close to even with the S&P through the summer, before really ramping up my performance in the last 3 months of the year, which is typically a bullish time of year.
::: Best/Worst Performers :::
– Top 10 Performing Industries For the Week –
1. Toy & Hobby Stores: 15.60%
2. Education & Training Services: 7.75%
3. Water Utilities: 6.45%
4. Reseach Services: 4.70%
5. Dairy Products: 4.35%
6. Tobacco Products: 4.20%
7. Diversified Communications: 4.00%
8. Sporting Goods Stores: 3.85%
9. Cigarettes: 3.75%
10. Auto Manufacturers: 2.65%
– Top 10 Worst Performing Industries For the Week –
1. Residential Construction: -4.35%
2. Printed Circuit Boards: -3.80%
3. Diversified Investments: -3.55%
4. Music & Video Stores: -3.40%
5. Mortage Investment: -3.20%
6. Oil & Gas Equipment & Servicese: -3.10%
7. Specialty Retail: -3.00%
8. Drug Manufacturers: -3.00%
9. Business/Management Services: -2.90%
10. Silver: -2.80%
– Top 5 Best Performing ETFs For the Week –
1. HLDRS Internet Infrastructure (IIH) 3.45%
2. India Fund (IFN) 2.90%
3. Central Europe and Russia Fund (CEE) 2.60%
4. HLDRS Telecom (TTH) 2.50%
5. Chile Fund (CH) 2.45%
– Worst 5 Performing ETF’s –
1. Latin America Discovery Fund (LDF) -8.90%
2. Morgan Stanley China (CAF) -5.45%
3. Ishares Silver (SLV) -5.05%
4. Ishares Homebuilders (ITB) -4.90%
5. SPDR Homebuilders (XHB) -4.70
::: IPO’s Worth Watching for This Week :::
No IPO’s worth watching for the next two weeks – the summer slowdown is upon us.
::: Upcoming Economic Reports (7/2/07 – 7/6/07) :::
Monday: ISM Index
Tuesday: Factory Orders, Pending Home Sales, Auto/Truck Sales
Wednesday: None – Holiday
Thursday: Initial Claims, ISM Services, Crude Inventories
Friday: Nonfarm Payrolls, Unemployment Rate, Hourly Earnings
::: Notable Upcoming Earnings Reports I’ll Be Watching This Week :::
None for this week but we are fast approaching earnings season!
::: In Case You Missed It – SelfInvestors Blog Entries of the Past Week :::
1. 9 IPO’s to Consider Right Now
https://selfinvestors.com/tradingstocks/ipos/ipo-watch-list-top-9-ipos-to-consider-right-now/
Note: Be sure to the check out the latest addition of the Investors Blog Network Festival at BioHealthInvestor