What a save yesterday!
There we were, with just30 minutes left totrade,down 2.5% on the S&P and all the other indexes when PRESTO, a buy program kicked in with a mania to cut half the day’s losses. Even more amazingly, in pre-market trading this morning they cut the other half out as the S&P was taken right back to 940 as”THEY” just can’t wait to BUYBUYBUY (as long as there are no sellers around and the volume is low). And so, here we are again,two weeks later -pretty much right where we were on “Double Top Tuesday,” the 19th, when I said: “We’ll be watching the May highs (if we can get there at all), tosee if we’re just making a double top for the monthat Dow 8,657(8th), Nas 1,773 (7th), S&P 930 (8th), NYSE 6,003 (8th) and Russell 512 (8th).”
While those were, indeed the highs for May and we did VERY well on the pullback but we did not flip bullish as we were waiting for a lower test than 8,200 so we went to cash, where we still wait. On June 1st, however,the marketrocketed 2.5% higher on the Dow and now we sitat Dow8,675, Nas 1,826, S&P 932, NYSE 6,034 and Russell 523. It’s progress but not a lot. Under ordinary circumstances, I should bethrilled – I had predicted a return to Dow 8,650 at theend of May and after earnings WHILE WE WERE CRASHING IN MARCH. What I am not thrilled about is the way we got here. We have gone from 6,500 to 8,650, just about 50% up, without a significant pullback. Imagine building a 5 story building (10% per story) and adding another floor each time without testing to see if the previous floor can hold. Would you insure it? Would you move into the top floor? That’s where we are as we look to move back over our 40% (off the 2007 highs) lines: Dow 8,413, Nasdaq 1,717, S&P 946, NYSE 6,232, Russell 514, SOX 329 and Transports 1,868. Obviously, we’ve crushed the Dow and Nasdaq numbers already but that’s just 2 of 7 so we are no better off at all than we were 2 weeks ago when we last tested this set.
Unfortunately, the Dow and Nasdaq are the indexes we trust the least. Both can be manipulated by the movement of just a few stocks and anyone looking at AMZN (2.3% of the index)over the past few weeks,AAPL (11.8%),CSCO (3.2%),MSFT…