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Saturday, March 10, 2007

Weekly Market Update - bears take a breather

Weekly Market Call

The week began with another selloff followed on Tuesday with a big up day. The remainder of the week the averages moved in a fairly tight range. Sentiment seems to have evened out with bulls remaining optimistic but saying that caution is in order and bears expecting a retest of the recent lows.

The only reasonably important economic news related to jobs and wages. February job growth came in just shy of expectations. Investors chose to believe this provided some assurance the economy was still in decent shape even though the number was the lowest in two years. Wages increased more than productivity did. On the one hand, higher wages support consumer spending but, coupled with a slower rate of productivity growth, it tends to compress company margins. Investors went with the bullish interpretation.

TradeRadar signals at the end of this week sit pretty much where they were at the end of last week: all indexes still flashing the SELL signal. In this first chart, you can see how SPY is displaying the classic TradeRadar reversal peak in spite of the 1% recovery in the S&P 500 this week.

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In this next chart, you can see how QQQQ has had several false SELL signals but sits now in firmly bearish territory.

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All in all, the economy seems to be in a slowing trend and the market is finally beginning to reflect that fact. My opinion is that we will retest the recent lows this coming week or the following week and the outcome will determine the course the market will take over the next several months.

ETF Comments

Indexes - as discussed above, all the indexes are flashing the TradeRadar SELL signal.

Commodities - XLE has been flashing a TradeRadar SELL signal since early January but it stubbornly refuses to capitulate. If you look at the price of oil as represented by a chart of USO, you will see why: oil hit an intermediate low in mid-January but has been moving up since then. Indeed, TradeRadar has been flashing a potential BUY signal on USO since mid-February.

Technology - the TradeRadar signal for XLK looks very much like that for QQQQ: a sloppy SELL

Housing - the home builders ETF (XHB) is looking very weak here and appears to be succumbing to the sub-prime mortgage mess. The REITs ETF (IYR), in spite of recovering somewhat this week, is still flashing a solid SELL signal as a result of last week's smackdown.

Biotech - XBI now appears weaker than the home builders.

Financial - XLF also recovered somewhat this week but the signal is still a SELL. The financials are still vulnerable to the mortgage situation, problems with the carry trade and the feeling that interest rates won't be coming down anytime soon.

TradeRadar Stock Picks

With the NASDAQ 100 recovering a bit this week, the ProShares Ultra Short QQQ (QID)fell back a bit. At $55.45, we are now showing a gain of 5.3% since our recommendation went out.

We continue to hold Generex (GNBT) even though it is going nowhere. It lost a penny this week to close at $1.71. We are showing a slight gain.

This week an adjustment of the TradeRadar filter settings led us to sell PacificNet (PACT) at $4.95 for a loss of 5.4%. The weak TradeRadar SELL signal first flashed on 2/12/2007 should have been heeded. With the stock at $6.42, we could have captured a 22% gain. Ah well...

Finally giving in to the negative tone in the market and the concerns over sub-prime mortgages, Tarragon (TARR) gave up its recent gains and then some. TARR finished the week at $11.17, off 14.4% from last Friday's closing price, handing us a loss of 3.9% and flashing a weak TradeRadar SELL signal.

1 comment:

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