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Daily Market Comments - May 2006

5/31 -- Stock Market Comments

On Friday, the Dow just touched the 50 day moving average. Tuesday saw very strong selling from that level. This could be the set-up for a Blue Ice Failure, the next target on the Dow being the 200 day moving average. This would imply but there would be another week or so to the downside. But also be prepared for a Bullish Harami in the markets today. This would reveal that the selling had stopped, a Double Bottom could be forming. Watch to see how they close these markets today, it will reveal which direction they plan to take the trends.

5/30 -- Stock Market Comments

Buy before a three-day weekend, sell after a three-day weekend. That is likely what is going on so far today with the morning futures showing weakness. The Dow closed right at the 50 day moving average on Friday. Today will be an important indicator to see if the 50 day moving average was the first target but is going to fail. The NASDAQ closed positive on Friday and has some more room to the upside before testing the 200 day moving average. Expect a consolidation-type day today to see whether the markets were doing a bounce in a downtrend or whether a new uptrend is in progress.  

5/26 -- Stock Market Comments

The strength in both the Dow and the NASDAQ confirmed the candlestick signals that have been forming over the past four days of trading. The stochastics were oversold in both indexes. This provided confirmation that the indecisive trading at the bottom was demonstrating a reversal. Now both indexes have their moving averages as targets. The Dow should come up and test the 50 day moving average and the NASDAQ should come up and test the 200 day moving average. This would imply that there should be a few days of positive trading. Short positions should have been covered or should be covered upon seeing confirmed buy signals. On Thursday, there were plenty of oversold stocks demonstrating strong buy signals.   

5/25 -- Stock Market Comments

On Wednesday, the Dow formed a Doji and the NASDAQ formed a Spinning Top. The Dow has now had four indecisive trading days in a row with the stochastics in the oversold condition. The NASDAQ formed a Bearish Engulfing signal two days ago in the oversold condition which was an indication to start watching for a candlestick buy signal. Today's pre-market futures indicate a strong open. A bullish day today would be a strong indication that they will be taking the markets back up to test the recent moving averages. Be a buyer on strength this morning. Close out the short positions that are revealing bullish signals. 

5/24 -- Stock Market Comments

There are two Doji signals and an Inverted Hammer in the Dow, and what appears to be a positive day in the futures so far. There is a Bearish Engulfing signal in the oversold condition in the NASDAQ. Start watching for a candlestick buy signal. Be prepared to start buying if the market acts strong today. The stochastics for both indexes are well into the oversold condition. The bond market rallied significantly off the economic news this morning. This could start adding strength to the equity markets.            

5/23 -- Stock Market Comments

Both the Dow and the NASDAQ had another indecisive trading day. With Friday's Hammer/Harami's followed by Monday's Doji days, the indecision is becoming very apparent as the markets have now entered the oversold conditions. The probabilities now indicate a bounce back up from here. Where would be the logical targets? Probably a test of the moving averages that were recently breached. This should give us a few days of positive trading in the markets. This scenario, of course, is  based on positive confirmation of the last two indecisive trading days.  A bullish day in the market today would warrant adding to the long  positions and covering some of the short positions.

5/22 -- Stock Market Comments

The  indecisive trading of Friday has not indicated one way or the  other any change of investor sentiment. Although the stochastics are  showing that the markets are beginning to get oversold, continue to  hold the short positions until a definite buy signal has appeared. This  could still be a day or two away. 

5/19 - Stock Market Comments

All indexes continued to sell off on Thursday. The Dow traded well  below the 50 day moving average. The NASDAQ traded well below the 200  day moving average. The stochastics are now getting into the oversold  condition. Anticipate another day or two of sluggish action until the  stochastics get well into the oversold condition. Continue to hold  short positions but start taking profits on partial positions. Also,  start watching for long positions to become available, some good buy  signals are beginning to appear. Last night's scans revealed 55 stocks  overbought and 1437 stocks oversold. This simple observation indicates  a bottom appearing soon.

5/18 -  Stock Market Comments

The Dow came down to the 50 day moving average in a hurry and went  below it. Any strength seen in the Dow today will probably be coming up  to touch the 50 day moving average. However, expect another few days of  the markets trying to form a bottom before any new buying comes back  in. The stochastics in the Dow have not quite yet gotten into the  oversold condition. The NASDAQ did not show support at the 200 day  moving average. Although it is in the oversold condition, there is a  gap to be filled at the 2150 level from early November. Continue to  hold the short positions and start adding long positions taht are  showing good buy signals.

5/17 -- Stock Market Comments

The lack of strength in both markets was not surprising on Tuesday.  The Dow still has the target of the 50 day moving average. The NASDAQ  closed right on the 200 day moving average. The NASDAQ stochastics are  already in the oversold condition. Look for this area to act as  support. The Dow probably will come down and  test the 50 day moving  average in the next couple of days. Continue to hold the new short  positions and start looking for long positions with strong buy signals.  Our scans are finding a decent number of bullish signals.

5/16 -- Stock Market Comments

Although the Dow showed some strength on Monday, there wasn't any  reversal signal demonstrated. The stochastics show that there could be  another two or three days to the downside. A small bounce may be  possible but that should be all that it is, a small bounce. Until the  Dow can get to a support level such as the 50 day moving average,  anticipate a few more days of bearish movement in these markets. The  NASDAQ bounced off the 200 day moving average on Monday. This could  indicate that a bottom is near but anticipate that it would take a  couple of days to firm up at these levels. Continue to hold some short  positions in the portfolio.    

5/15 -- Stock Market Comments

Both the Dow and the NASDAQ are moving toward their nearest moving  averages. The Dow appears to be targeting the 50 day moving average  while the NASDAQ appears to be targeting the 200 day moving average.  The stochastics are still moving in a downward direction. Both indexes  reversed after the confirmed Doji signals. Crude oil prices and gold  prices are dropping hard this morning. This might become the reason for  the markets to eventually bottom out and start back up. Short positions  were recommended in the last couple of days. Continue to hold the  shorts until strong buy signals appear. Continue to buy in the sectors  that appear to be holding up well.

5/12 -- Stock Market Comments

Severe sell signals that were required to tell us that the investor  sentiment had changed after a long uptrend was experienced on  Thursday in all of the market  indexes. Previously, when one index was  down, the other indexes were flat or positive, demonstrating that funds  were shifting from sector to sector versus selling in general.  Thursday's trading showed selling everywhere. The Dow formed an   Evening Star signal. The NASDAQ had a huge selloff day. This indicates  that the sellers have taken control of the trend. Add short positions  to the portfolio as your long positions should be closed out. Expect at  least a few days to the downside. 

5/11 -- Stock Market Comments

Although it is in overbought conditions, the Dow continues to show  good strength. It should test its all time high level very soon. The  NASDAQ is not showing the same strength as the Dow. As of yet, this  still indicates sector rotation versus any major selling. Continue to  hold long positions in the sectors that are still moving well. The  mining stocks are acting strong.     

5/10 -- Stock Market Comments

The Dow continues it's strength even though it's well into the  overbought area. The NASDAQ consolidated also but the stochastics are  still in an uptrend. Continue to hold the long positions until a severe  sell signal appears in both indexes.         

5/9 -- Stock Market Comments

The Doji-day in the Dow was not unexpected after the big move that  we saw on Friday. However, it is still a Doji which creates the  possibility of a potential pullback if the Dow closes more than halfway  down Friday's bullish candle. The NASDAQ is trading in the middle of  its trend channel. The stochastics are still at the lower end of the  range in an upward trend. This indicates that there could be more  strength in the NASDAQ while the Dow has the possibility of pulling  back. This evaluation should conclude that there is market rotation  versus any massive selling. Continue to hold the strong long  positions. This is a market where specific sectors are performing very  well.  

5/8 -- Stock Market Comments

The bullish candle in the Dow came up through some important  resistant trend lines on Friday. A large bullish candle seen at the top  of a trend, in the overbought condition, usually is the forewarning to  start watching for a candlestick sell signal, since there is exuberant  buying at the top. However, the other indexes, the NASDAQ and the  S&P, are still showing good upside potential. Even if the Dow  starts pulling back, the market sector rotations that we have seen for  the past few months are probably still in effect. Continue to hold long  positions in the strong sectors. There are also some good weak sectors  that can be shorted. The money is being made in this market by being in  the correct sectors.   

5/5 -- Stock Market Comments

The uptrend is still persisting. Continue to hold the long  positions. There might not be a lot of activity on a Friday going into  the summer. The slower job growth rate announced this morning has added  strength to the premarket futures. The concept being that the feds will  not be aggressive with the rate heights. The uptrend will be slow but  persistent. 

5/4 -- Stock Market Comments

The sideways movement of the markets are still evident. Crude oil  prices dropped dramatically on Wednesday, down over two dollars.  Continue to hold the long positions. There is nothing in the markets  that have indicated any great change of investor sentiment. We are  still in a slow uptrending market.   

5/3 -- Stock Market Comments

On Tuesday the Dow was strong while the NASDAQ was sluggish. This  morning the Dow futures are weak while the NASDAQ futures are positive.  This continues to add to the evidence that there is a sideways movement  in this market. This is an environment that keeps confirming that  sectors are rotating versus any major buying or selling coming into the  market. This scenario has been effective for the last two months. As of  now, there are not any indicators that would change this sentiment.  Continue to hold the stocks in the strong sectors. 

5/2 -- Stock Market Comments

The Dow formed another Shooting Star signal in the overbought area.  The NASDAQ closed below the 50 day moving average. The stochastics  still have downward direction potential. Although the markets are  openning with strong futures this morning, they have already indicated  toppiness. Be careful of the positive open being followed by a selloff  today. Continue to hold the long positions in the sectors that are  maintaining strength. Be prepared to take profits in the stocks that  are starting to show weakness. 

5/1 -- Stock Market Comments

The Dow started showing some indecision at the end of last week,  forming a Spinning Top and a Shooting Star/Doji. Also note that the  high for both Thursday and Friday were at exactly the same, forming a  Tweezer Top. Seeing a few days of weakness would not be out of the  realm probability. Although the overall uptrend is still in effect,  small pullbacks should be a constant occurrence. With all the  uncertainty from Iran, the markets should have a fairly difficult time  getting any steam to the upside. Continue to hold the long positions  but be prepared to come out of them on the first signs of sell  signals.   


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