Weekly Wrap
The most noteworthy action occurred on Wednesday. The S&P was up a modest 2 points on Tuesday after a few more mergers were announced. Then on Wednesday, the S&P opened sharply lower after the Shanghai index had lost 6.5%. There were concerns about global implications of a potential bubble-burst in China.
Those concerns were quickly dismissed, however, as traders perhaps remembered that the February 27 meltdown in the stock market after a similar drop in the Shanghai market simply produced an excellent buying opportunity with no lasting negatives. By mid-day the S&P was up fractionally. The bad news proved no news at all.
Then at 2:00 that afternoon the minutes of the May 9 Fed policy committee meeting (FOMC) were released. There was nothing new or surprising. The minutes reflected exactly what was in the policy statement previously released - that the Fed's predominant concern remains inflation, that low levels of unemployment create inflation risks, and that the economy is expected to pick up over the rest of the year.
No news proved very good news. The S&P surged and closed the day up 12 points.
On Thursday the S&P was flat, holding its gains on a fairly quiet news day. Then on Friday, some legitimate good news arrived.
The core personal consumption expenditure (PCE) deflator was up just 0.1% for April. That was below an expected 0.2% increase and brought the year-over-year gain down to 2.0%. That is at the top of the Fed's forecast range of 1.75% to 2.0% for 2007 for the first time since the Fed stopped raising rates. Also that day it was reported that May nonfarm payrolls were up a larger than expected 188,000.
The S&P 500 gained 6 points on Friday on the good inflation and economic news.
There were a few merger announcements this week of note. RBS upped its bid for ABM Amro, Archstone-Smith went private for $22 billion, CDW did likewise for $7.3 billion, Wachovia bought A.G. Edwards for $6.3 billion. Morgan Stanley bought an Australian real estate concern for $3.9 billion, and Ceridian went private for $5.3 billion. That was enough to keep investors optimistic that more deals are on the way.
The major economic reports were the PCE deflator and payroll data noted above. Other upbeat reports this week included an uptick in May consumer confidence and a May ISM manufacturing survey increase to 55.0 from 54.7 in April. On the negative side was a downward revision to first quarter real GDP growth to just a 0.6% annual rate. It was widely ignored, however, as old news.
The earnings calendar was light. Dell reported earnings above expectations but gave a mixed outlook and announced layoffs. The stock price jumped. Costco reported earnings in line with expectations while Sears disappointed.
Oil prices closed little changed for the week, holding near $65 a barrel. The 10-year note yield continued its trend higher and closed the week at 4.96%. A 5% yield is widely expected soon based on the belief that economic growth is strengthening.
The S&P set a record closing high this week. Momentum remains very strong across the board. Long-term optimism is driving the market. Bad news simply brings buying opportunities. Whether the fundamentals fully justify the bullish sentiment is questionable, but the tone this past week was clearly evident - every single day.
| Index | Started Week | Ended Week | Change | % Change | YTD |
| DJIA | 13507.28 | 13668.11 | 160.83 | 1.2 % | 9.7 % |
| Nasdaq | 2557.19 | 2613.92 | 56.73 | 2.2 % | 8.2 % |
| S&P 500 | 1515.73 | 1536.34 | 20.61 | 1.4 % | 8.3 % |
| Russell 2000 | 829.93 | 853.41 | 23.48 | 2.8 % | 8.3 |
Dow Jones Industrial Index
Intraday high 13,756.69
5 day interday high(resistance): 13,673
Missed by -84
0.619% :(
Intraday low 13,562.54
2nd intraday support: 13,548
Missed by -14
0.103% :(
Closed At 13,668.11
5 day interday high(resistance): 13,673
Missed by +5
0.037%
Direction for 010607: UP
NASDAQ Composite Index
Intraday high 2,626.40
2nd intraday resistance: 2,622
Missed by -4
0.152%
Intraday low 2,608.69
1st intraday support: 2,599 (5 day interday high(resistance): 2,608) but i cannot play cheat!
Missed by -9
0.345% :(
Closed At 2,613.92
5 day interday high(resistance): 2,608
Missed by -5
0.191%
zzzz
Direction for 010607: UP
S&P500 Index
Intraday high 1,540.56
5 day interday high(resistance): 1,536
Missed by -4
0.26%
Intraday low 1,530.62
1st intraday support: 1,529
Missed by -1
0.065% :)
Closed At 1,536.34
5 day interday high(resistance): 1,536
Missed by 0
0% *clap*
Direction for 010607: UP
Closing Price Accuracy (over the last 3 days)
DOW JONES : 0.185/3 = 0.0616% off (99.938%)
NASDAQ : 0.538/3 = 0.179% off (99.8200%) <---now I understand why the $VXN exists S&P 500 : 0.131/3 = 0.0437% off (99.9563%) Directional Correctness:
2/3 (66.67%)
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Ok, other than the Nasdaq, I had a very good record of 99.9% closing price accuraccy for the indexes. The market direction was off and I learnt one good lesson - never only rely on technical analysis ONLY. Trading is all about information and how to make use of that information. Well, it was my first week so, long way to go!
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