Introduction
This is the first of something I am contemplating doing most weekends. Thus, it is experimental and subject to a good deal of change. The missive's name is self-explanatory.
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Stocks
* Overall, last week was positive in the equity market. My seven-measure tracking group was up an average 0.2% (median gain of 0.4%), with only one component falling during the period. The NASDAQ was down 1.5%, while the gains in the other six components ran in a range of 1.0% for the Russell 2000, to 0.2% for the S&P 500.
* For the year to date through last Friday, the tracking group was down 2.6%, on average, registering a median decline of a very similar 2.5%. All seven components were in the red, with losses running in a range of 0.7% for the NYSE Composite, to 6.2% for the NASDAQ 100.
* Based on the most basic screen of technical indicators I look at, the stock market came out of last week solidly short-term overbought. At present, I am using a template that begins measurements as of 10/29 last year. This is just before the Presidential election, which ignited a rally I believe was highly "suspect." And one of the proofs of that opinion was how quickly the rally aborted immediately at the beginning of 2005.
* As the table below indicates, the strong on-balance advance of the last few weeks has brought the cumulative NYSE advance-decline result to close to where it was at its recent peak, which was the week ended 3/4. However, as of last week, cumulative NYSE up-down volume remained well below its March highs.
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SELECTED NYSE BREADTH MEASURES --
WEEKLY & CUMULATIVE DATA (10/29/04=0)
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Adv - Dec UVol - DVol 52W H - L Closing Tick
Week ----------- ----------- ----------- ------------
Ended Week Cum Week Cum Week Cum Week Cum
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2005
06/10 1196 23044 0.52 4.52 633 20116 371 14092
06/03* 1900 21848 0.28 4.00 627 19483 398 13721
05/27 2267 19948 1.06 3.72 333 18856 296 13323
05/20 4613 17681 2.79 2.66 201 18523 601 13027
05/13 -2141 13068 -1.69 -0.13 17 18322 629 12426
05/06 2746 15209 1.55 1.56 184 18305 791 11797
04/29 305 12463 -0.40 0.01 -324 18121 506 11006
04/22 1461 12158 0.54 0.41 -386 18445 399 10500
04/15 -4417 10697 -3.36 -0.13 -315 18831 117 10101
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03/04 1989 23753 0.61 8.36 1228 18424 745 8137
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*Four-day trading week.
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* The following table, using the DJIA, the S&P 500 and the NASDAQ Composite as proxies, shows clearly the slippage in 200-day moving-average apogee existing in early March, to the negative readings during April, back into the black in recent weeks. But I detect momentum loss here, and perhaps a sensible near-term target would be a retest of 200-day averages levels? This would require respective DJIA, S&P and NASDAQ declines of about 0.7%, 2.3% and 1.9% from last Friday's closing values.
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DJIA, NASDAQ COMPOSITE AND S&P 500 CLOSING PRICES ON
SELECTED DATES VERSUS RESPECTIVE 20-DAY, 50-DAY AND
200-DAY MOVING AVERAGES (Percent or Portion Thereof)
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DJIA Vs. NAZ Comp. Vs. S&P 500 Vs.
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Date 20D 50D 200D 20D 50D 200D 20D 50D 200D
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2005
06/10 0.4 1.5 0.7 0.2 3.3 2.0 0.4 1.9 2.3
06/03 0.5 1.0 0.4 2.1 4.1 2.9 1.0 2.0 2.6
05/27 1.6 1.8 1.2 3.7 4.7 3.2 1.8 2.3 2.7
05/20 1.8 1.0 0.6 4.0 3.4 2.0 1.9 1.5 2.1
05/13 -0.7 -2.7 -2.5 1.6 -0.3 -1.1 -0.5 -1.8 -0.6
05/06 1.1 -1.3 -0.3 1.2 -1.3 -1.3 0.9 -0.8 1.2
04/29 -0.8 -3.1 -1.7 -1.7 -4.0 -3.4 -0.6 -2.2 0.2
04/22 -1.9 -4.0 -2.1 -2.0 -4.2 -3.0 -1.5 -2.9 -0.3
04/15 -3.5 -5.2 -2.8 -4.1 -6.1 -4.2 -2.8 -4.2 -1.0
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03/04 1.6 2.6 5.7 0.3 -0.4 4.1 1.5 2.3 6.6
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Interest Rates
* Treasury yields rose across the curve last week, with the increase most pronounced in the two- to five-year range. A piece I wrote last week (6/6, "Bombs Away for the Economy and the Stock Market?") stated:
"In addition [to the secular bear stock market], we may now have the makings of a new cyclical bear market -- in bonds, of all things, believe it or not! [There were important] lows (in yield) on Friday morning [5/27] on the 10-year and 30-year Treasury issues: 3.80% and 4.15%, respectively, versus respective late-Friday [5/27] levels of 3.98% and 4.28%.
Last Friday, the 10- and 30-year issues finished at respective yields of 4.05% and 4.32%, up seven and four basis points for the week, and 25 and 17 basis points above the 5/27 lows.
* Last week saw a great deal of speculation regarding the Fed's futures course with regard to additional increases in the Federal Funds Rate. The week's highlight in this area was Alan Greenspan's Congressional testimony on Thursday, which did nothing very much to change expectations, at least those being expressed in the fed funds futures market. As of last Friday, the futures market continued to indicate the strong probability of another 25 basis-point hike at the FOMC's June meeting, to 3.25%, and another 50 basis points beyond that by year-end. On Friday, the December future finished at 3.77%.
Gold
* Physical gold rose about 1% last week. Its spot price just below $427 remained well above the recent intra-day low of around $413. But last week's real winner in this area was the XAU, which closed on Friday at 88.54. This represented only a modest gain for the week, but the XAU has now advanced roughly 12.5% from its recent low close of 78.73, set less than a month ago, on 5/16. Gold's recent correction was much better contained in the metal than in the stocks. However, the stocks are now leading in the other direction, which I interpret as a very constructive sign.
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