Stock Market

The Boyz on The Street tried to turn it around today by
purchasing signal baskets of stocks like the Dow 30, but
to little avail. The SP500 broke critical short term support
at 1380, thus ratifying the turn in the market.

The short term trend is down, but the market has developed a
substantial short term oversold condition. At this point, only
traders with acute timing sense should be trading ahead of the
trend.

My intermediate term indicators (30 days +) have turned down and
are flashing a strong caution. Moreover, the trends in the buying
and selling pressure gauges are still gradual enough to suggest
that any further correction and subsequent base building period
could take several months, although the depth of any further
correction need not be severe. The intermediate term technicals
have yet to reach comfortable oversold levels.

The fundamentals remain positive, but are more subdued as earnings
estimates may be trimmed ahead of the end of Q1 '07. Risk levels
remain elevated as the US economy continues to pass through the
slowdown phase. However, housing and business inventory corrections
have been well underway.

As discussed in prior posts since 12/06, I remain cautious on the
market and have stayed fully in cash since late last year. Unlike
many players, I am still most curious about whether a resumption of
stronger economic growth a little later this year will be balanced
enough to allow for continuation of a cyclical bull market into
and through 2008. I still think that will be the more important
question this year.

The sets of leading economic indicators I follow continue to point
to ongoing growth at a subdued pace. The one surprise with these
indicators has been the volatility recently seen in the services
sector. I suspect sensitivity to fuels and materials prices may be
especially important here.