Feb

22

2005

Waiting For Confirmation

(The following is a small portion of the free market report sent to members of SelfInvestors.com..  if you’d like to receive the free report via email each weekend, you may use the sign up form on the home page)

The market hasn’t provided many additional clues in the past week as to its future direction, although the distribution day on Thursday adds a bit of skepticism.  Until the Dow and S&P can clear those 3.5 year highs and the Nasdaq can surge above resistance of the 50 day moving average, it’s best to retain a somewhat cautious approach.  Continuing to keep 50% in cash is a wise strategy at this point.  With earnings season winding down, the market will focus its attention on interest rates and inflation concerns.. which all of a sudden became a big issue with the release Friday of an unexpected jump in the core Producer Price Index to a level not seen since 1996!  The market remains resilient though.  Even with the jump in the inflation  number and the continued rise in oil, the market held its own on Friday and halted the downward momentum of Thursday’s sell off.  How the market holds up next week will be interesting.  I still believe that the Nasdaq will retest the lows of this recent consolidation somewhere in the 2000 range.  Combine the retreat from resistance of the 50 day moving average (which was discussed in the last report) with Thursday’s day of distribution (institutional selling) and the scenario looks highly likely.  As for the S&P and Dow, they continue to hold above their support levels of the 50 day moving average (10650 for the Dow, 1195 for the S&P.. it’s close to that now).  Those are key levels to watch.