My Stock Winners

Telecommunications (TTH)
Bullish
Sector trading above its…
20-day Moving Average: NO
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment: Pessimism dominates the sentiment backdrop of the telecommunications sector despite its impressive technical uptrend. In fact, Wall Street has turned its back on the components of this sector. Of the 161 analysts ratings on the components of the Telecommunications HOLDRS Trust (TTH – 37.83), less than 31 percent come in at a “buy,” while an impressive 10.6 percent rate them a “sell.” This bearish configuration leaves ample room for potential upgrades. What’s more, the number of the exchange-traded fund’s (ETF’s) shares sold short jumped sharply in April, pushing its short-interest ratio even higher. This growing short interest underscores the pessimism that continues to surround the sector.

Outlook: Technically speaking, the ETF pulled back slightly last week, breaking through support at its rising 20-day moving average as investors took some profits off the table. However, the trust has support in the form of its 50-day trendline rising into the region, which should help to buoy the shares in the near term.

Utilities (UTH)
Bullish
Sector trading above its…
20-day Moving Average: YES
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment: Skepticism is extremely heavy in the sentiment backdrop of the utilities sector. Wall Street has placed some heavy bets against the group as only 27 percent of the 181 analyst ranking on the components of the utilities sector come in at a “buy.” Any upgrades from this dour group could help to add more lift to this sector. Despite the fact that the number of Utilities HOLDRS Trust (UTH – 148.70) shares sold short dropped by 12 percent in April, the ETF still has a hefty short-interest ratio, pointing to high levels of pessimism among short sellers.

Outlook: During trading last week, the ETF hit yet another all-time high, breaking through the 150 level before pulling back slightly on Friday to digest some of its gains. The trust is trekking higher along the steadfast support of its ascending 10-day and 20-day moving averages An unwinding of the existing pessimism toward the sector should help to fuel additional gains.

Airlines (XAL)
Bearish
Sector trading above its…
20-day Moving Average: NO
50-day Moving Average: NO
100-day Moving Average: NO

Sentiment: Optimism permeates the sentiment backdrop of the airline sector despite its weak technical performance. Wall Street is enamored of the group, as roughly 62 percent of the analysts ratings on the components of the sector come in at “buy.” Any downgrades from this optimistic pack could fuel additional losses in this group. Options players have yet to levy heavy bearish bets against the group as the composite Schaeffer’s put/call open interest ratio sits lower than roughly 60 percent of the readings taken during the past year. This complacency against the sector’s weak technical backdrop has bearish implications from a contrarian perspective.

Outlook: After being rejected by resistance at the 56 level and its declining 50-day moving average, the AMEX Airlines Index (XAL – 50.11) dropped sharply, breaking through former support at the 52 level. In fact, the index is now trading at its lowest level since October 10. In the index is also below its 100-week moving average, leaving it vulnerable to additional downside as the remaining optimism unravels in the form of increased selling pressure.

Last week, there was no celebrating. There were no cheers or 20-point font headlines exclaiming the news that the Dow had busted through the 13,000 level for the first time ever. Past breakouts had been met with a great deal of hoopla on Wall Street, but this one seemed to pass with more of a cringe and a groan, which is more encouraging than the rampaging enthusiasm that accompanied the technical breakouts we saw in the early months of 2000.

Caution on the Street is rampant, as investors ponder the seeming disconnect between the economy and decelerating earnings growth with a stock market achieving new milestones. The Dow Jones Industrial Average (DJIA) punched through the 13,000 mark on Wednesday and stayed above that level for the remainder of the week. In fact, the Dow has finished 11 of the past 12 trading sessions with a gain. And these impressive gains have come amid concerns of a weakening dollar and a weakening economy. Even the dreaded “R” word (recession) is being batted around the financial press with increasing regularity.

Money managers have grown extremely skeptical during the most recent leg of the market’s uptrend. The latest Big Money poll reveals that only 46 percent of professional investors surveyed consider themselves bullish or very bullish, which is down sharply from 64 percent in autumn. In fact, the neutral percentage has spiked from last fall’s 20 percent to 37 percent.

What’s more, individual investors remain skeptical of the upside that we have seen. An article in Barron’s over the weekend pointed out that for a fifth straight week, money flowed out of domestic stock mutual funds.

Signs of pessimism can be seen elsewhere. The New York Stock Exchange (NYSE) saw April short-interest activity jump to another record, increasing by 4.6 percent.

These low expectations have helped to fuel the rally as earnings have come in stronger than expected. In some cases, the weak dollar has added positively to multinationals bottom line, which has only raised more cautionary flags as analysts fret over the quality of earnings. When the reporting period started, analysts had predicted growth of roughly 3.3 percent from components of the S&P 500 Index (SPX). Now, Thomson Financial is stating that when the final count is in, first-quarter earnings reports are likely to be up by approximately seven percent.

Furthermore, we are headed into another week heavily laden with economic reports. Today, the core PCE Inflation report will be closely watched for inflation levels, while Tuesday’s Institute of Supply Management report and Friday’s nonfarm payrolls will be perused for signs of life within the economy. The low expectations of analysts and traders makes it easier for surprises and rallies in the market. Additionally, considering the hedging activity we continue to see, the likelihood of hard pullbacks and panic selling has been reduced.

Summer is here!
It means to buy healthcare stock, becuse of market rotation. Dows and high tech stocks is near top and we have a sector rotation ahead of us.

My pick for the summer is HLS.

Sector: Healthcare
Industry: Specialized Health Services
Full Time Employees: 21,000
HealthSouth Corporation provides ambulatory surgery and rehabilitative health care services in the United States.

Here are some technical analysis:

Composite Indicator
Trend Spotter TM Buy

Short Term Indicators
7 Day Average Directional Indicator Buy
10 - 8 Day Moving Average Hilo Channel Buy
20 Day Moving Average vs Price Buy
20 - 50 Day MACD Oscillator Sell
20 Day Bollinger Bands Hold

Short Term Indicators Average: 85% - Buy
20-Day Average Volume - 483420

Medium Term Indicators
40 Day Commodity Channel Index Hold
50 Day Moving Average vs Price Buy
20 - 100 Day MACD Oscillator Buy
50 Day Parabolic Time/Price Buy

Medium Term Indicators Average: 90% - Buy
50-Day Average Volume - 523322

Long Term Indicators
60 Day Commodity Channel Index Hold
100 Day Moving Average vs Price Buy
50 - 100 Day MACD Oscillator Buy
Long Term Indicators Average: 67% - Buy
100-Day Average Volume - 457075

Overall Average: 86% - Buy

Follow the insiders!

Insider Purchases - Last 6 Months
Purchases 10,000
Sales 0

Trading
Date Name Title Shares Price
03/29/07 MCLAUGHLIN JOHN PETER Chief Executive Officer Gift 50,000 $0.00
02/06/07 BRODERICK PATRICK A Vice President & General Counsel Gift 8,000 $0.00
02/06/07 HUANG JAMES Z President Gift 12,000 $0.00
12/04/06 HUANG JAMES Z President Buy 200 $6.72
12/04/06 HUANG JAMES Z President Buy 800 $6.77
12/04/06 HUANG JAMES Z President Buy 800 $6.40
12/04/06 HUANG JAMES Z President Buy 200 $6.44
12/04/06 HUANG JAMES Z President Buy 1,000 $6.41
12/04/06 HUANG JAMES Z President Buy 600 $6.37
12/04/06 HUANG JAMES Z President Buy 400 $6.40
12/04/06 HUANG JAMES Z President Buy 2,700 $6.38
12/01/06 HUANG JAMES Z President Buy 2,000 $6.66
12/01/06 HUANG JAMES Z President Buy 300 $6.65
11/30/06 HUANG JAMES Z President Buy 1,000 $6.65
08/22/06 HUANG JAMES Z President Buy 1,000 $6.77
08/21/06 HUANG JAMES Z President Buy 400 $6.74
08/17/06 HUANG JAMES Z President Buy 1,000 $6.73
08/15/06 POWELL MICHAEL F Director Buy 1 $6.86
08/15/06 SOFINNOVA VENTURES INC Buy 1 $6.86

Telecommunications (TTH)
Bullish
Sector trading above its…
20-day Moving Average: YES
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment: Pessimism dominates the sentiment backdrop of the telecommunications sector despite its impressive technical uptrend. In fact, Wall Street has turned its back on the components of this sector. Of the 162 analysts ratings on the components of the Telecommunications HOLDRS Trust (TTH ?38.62), less than 31 percent come in at a “buy,” while an impressive 10.5 percent rate them a “sell.” This bearish configuration leaves ample room for potential upgrades. What’s more, the number of the ETF’s shares sold short jumped sharply in April, pushing its short-interest ratio even higher. This growing short interest underscores the pessimism that continues to surround the sector.

Outlook: Technically speaking, the ETF bounced off its 10-day trendline on Friday and tagged a fresh five-year high at $38.62. TTH also has support in the form of its ascending 10-week and 20-week trendlines climbing into the region. As the sector continues to rally, it should force the bears to unload their pessimistic positions, which will add more buying pressure to the group.

Utilities (UTH)
Bullish
Sector trading above its…
20-day Moving Average: YES
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment: Skepticism is extremely heavy in the sentiment backdrop of the utilities sector. Wall Street has placed some heavy bets against the group as only 27 percent of the 180 analyst ranking on the components of the utilities sector come in at a “buy.” Any upgrades from this dour group could help to add more lift to this sector. Despite the fact that the number of Utilities HOLDRS Trust shares sold short dropped by 12 percent in April, the ETF still has a hefty short-interest ratio, pointing to high levels of pessimism still among short sellers.

Outlook: During trading last week, the ETF hit yet another all-time high and continues to sit on support from its ascending 10-day moving average. The trust also has additional support in the form of its ascending 20-day trendline climbing into the region to help carry it higher. The security also has strong support in the form of its rising 10-week and 20-week moving averages, which can help to buoy the shares.

Airlines (XAL)
Bearish
Sector trading above its…
20-day Moving Average: YES
50-day Moving Average: YES
100-day Moving Average: NO

Sentiment: The airline sector continues to be blanketed in optimism despite its weak technical performance. Wall Street is enamored of the group, as roughly 65 percent of the analysts ratings on the components of the sector come in at “buy.” Any downgrades from this optimistic pack could fuel additional losses in this group. Options players have yet to levy heavy bearish bets against the group as the composite Schaeffer’s put/call open interest ratio sits in the middle of its annual range. This complacency against the sectors weak technical backdrop has bearish implications from a contrarian perspective.

Outlook: After being rejected by resistance at the 56 level, the XAL has dropped below potential support at its 10-day and 20-day moving averages. It appears the index is now poised to pull back for another test of support at the 52 level.

The bears were left out in the cold this week as the market continued its uptrend. Inflation data came in milder than expected and earnings have been largely stronger than expected (which shouldn’t be too much of a surprise considering how much expectations were ratcheted lower ahead of the reporting season). The Dow Jones Industrial Average (DJIA) put in a solid performance, gaining 2.8 percent on the week, as the market was graced with strong earnings reports from Dow components Coca-Cola (KO: sentiment, chart, options) , Caterpillar (CAT: sentiment, chart, options) , Johnson & Johnson (JNJ: sentiment, chart, options) , and Honeywell International (HON: sentiment, chart, options) .

The S&P 500 Index (SPX 1,484.35) tacked on 2.2 percent last week and the broad-market index is now up 4.7 percent since the start of the year, as it has yet again begun to tag fresh multi-year highs.

But how have investors and Wall Street reacted? By piling on more pessimism. The New York Stock Exchange (NYSE) recently reported short-interest activity for April, revealing a jump to another record. In fact, from March 15 through April 13, the number of shares short on the NYSE increased by 4.6 percent. During that same time frame, the SPX gained nearly 4.4 percent.

A bit of history should give you healthy perspective on the current short interest situation. The NYSE short-interest ratio (total short interest divided by average daily trading volume) stood at 3.7 when the SPX peaked around 1,500 in early 2000. This is a noteworthy fact as the SPX closed Friday fewer than 16 points away from this round-number area. (As a side note, the equal weighted SPX crossed above 2,000 this week and is trading at an all-time high). With the NYSE short-interest ratio currently at 6.1, this is consistent with the level of shorting activity that took place during the mid-to-late 1990’s rally in the market and also the level of shorting activity that occurred as the market carved out its bear market lows in 2002-2003. Each of these periods were favorable for accumulating stocks.

In other words, despite the fact that the market may look “tired” or “overbought” from a technical perspective on a chart, the short-interest ratio continues to stand at levels consistent with bullish price action, which favors the bulls and suggests that any corrections will continue to be modest and short lived, unless and until we see a major capitulation in the short interest like that of early 2000.

As further evidence of skepticism that should ultimately provide fuel for a continued rally, let’s turn to the latest Commitment of Traders report, which is published weekly. Coming into last week, small traders of S&P futures netted the largest short position in the past five years. Furthermore, large speculators in E-mini S&P futures (which some suspect are hedge funds) also netted the largest short position in five years.

In both cases, these groups have been caught short preceding huge rallies in the market, and history seems to be again repeating itself. As we saw in May 2006, this level of pessimism from traders does not mean the market is “correction proof,” but keep in mind that the magnitude of the correction in 2006 was shallow with respect to the post-correction price action in 2006.

Meanwhile, the CBOE Market Volatility Index (VIX - 12.07) for SPX options continues to find support at its 160-day moving average, which resides at the 12 level. While moves down to VIX 12 might continue to cause some short-term hiccups for the market like moves down to the 10 area in prior months, it is also of interest that the SPX is up almost 50 points since the first test of this moving average on March 21.

So, while we might be transitioning into a higher volatility market environment, the early signs are the market can digest this, much like it did in the mid-1990s. I think transitioning into a higher VIX environment that is similar to mid-1990s would be a good thing, as higher lows on the VIX would make it much more difficult to identify the obvious “low VIX zone”, which inhibits market progress as everyone knows it’s a sure thing that you must buy put premium and pull back from buying stocks. This zone over the past year or two has been at or near the VIX 10 level.

Looking ahead to the rest of this week, a number of energy companies are scheduled to report earnings and it will be up to this group to maintain the positive momentum that has recently carried the broad market higher. Last week’s reports were dominated by financial companies, which saw a number of the big bank and brokerage firms reporting better-than-expected results. This positive news has helped to assuage some of the subprime fears that are lingering and give the sector a fresh boost.

For the sector to maintain its recent uptrend, it will be crucial for stocks in this group to continue trading above support after the economic data and the multiple earnings releases this week. Another positive report could help to boost this group once again. Elsewhere, traders will be closely watching the durable good orders report and the employment cost index for signs of slowing in the economy and growth in inflation.

A day after I recommended SNDK, it is upgraded by Citigroup from “hold” to “buy”.
Great pick, isn’t it?

Will INTV be next?
I certainly hope so.

Disclosure: sold SNDK and replaced with INTV today due to upgrade (sell the news, buy the rumors)

Intervoice Inc. (INTV)

Recommendation:Strong Buy (Target: 8+)

Technical Comments:
Moving Average Convergence/Divergence (MACD) indicates a Bullish Trend.
Up/Down volume pattern indicates that the stock is under Accumulation.
The 50 day Moving Average is rising which is Bullish.
Look for Support at 6.39
Price Target: 8-10

Price Analysis
Yr. High 8.10
Yr. Low 5.58
MO Chg.(%) 1.5
Trend Line Resistance N/A
Trend Line Support 6.39
Resistance Range 6.84-6.87
Support Range 6.61-6.65
SELL STOP 5.94
Volatility(%) 2.8
Position 66
ADXR 15
MA Price % Slope
10 Day 6.71 100.4 UP
21 Day 6.67 100.8 UP
50 Day 6.62 101.7 UP
200 Day 6.61 101.9 DOWN
Technical Analysis

Alpha -0.04
Beta 1.14

MACD ST BL
MACD LT BL
STO(Fast %K) 46
STO(Slow %K) 63
50-Day R.S. 0.99
Wilder’s RSI 44
OBOS -1
B.BANDS 33
RSV 25

Recommendation: Strong Buy

Technical Analysis:
Moving Average Convergence/Divergence (MACD) indicates a Bullish Trend.
Chart pattern indicates a Possible Trend Reversal from sell
Relative Strength is Neutral.
Up/Down volume pattern indicates that the stock is under Accumulation.
The 50 day Moving Average is rising which is Bullish.

Price Analysis

Yr. High 66.20
Yr. Low 35.82
MO Chg.(%) -2.2
Trend Line Resistance 44.68
Trend Line Support N/A
Resistance Range 42.54-43.31
Support Range 41.48-42.30
SELL STOP 42.51
Volatility(%) 2.4
Position 26
ADXR 20
MA Price % Slope
10 Day 43.06 98.8 DOWN
21 Day 43.71 97.3 DOWN
50 Day 41.36 102.8 UP
200 Day 46.47 91.5 DOWN

Technical Data

Alpha -0.18
Beta 1.65

MACD ST BR
MACD LT BL
STO(Fast %K) 53
STO(Slow %K) 39
50-Day R.S. 1.01
Wilder’s RSI 26
OBOS 2
B.BANDS 11
RSV 22

SNDK is dirt cheap at this level
RSI is around 30, overly sold

————– DYNEGY INC CL A NEW (NYSE: DYN) ————–

Insider Name: Eileen K. Murray
Insider Position: Head of Global Ops
Insider Action: 47,000 shrs on 4/13/2007
Insider Total Holding: 297,040 shrs

——————————————————-
Undervaluation Merits…

P/E Ratio = 10.0 (Industry Average 12.8)
P/S Ratio = 1.01 (Industry Average 1.58)
P/B Ratio = 2.31 (Industry Average 2.51)
P/CF Ratio = 8.90 (Industry Average 10.50)

Industry: National Investment Brokerage

========= Undervalued Stock #2 ==========

————— Alltel Corp. (NYSE: AT) —————

Insider Name: Ronald Townsend
Insider Position: Director
Insider Action: 2,200 shrs on 4/10/2007
Insider Total Holding: 4,492 shrs

——————————————————-
Undervaluation Merits…

P/S Ratio = 2.83 (Industry Average 2.88)
P/B Ratio = 1.78 (Industry Average 2.14)

Industry: Domestic Telecom Services

——————————————————-
Other Merits…

Dividend Yield = 0.70%
Exceeded Analysts’ Estimates for Past 5 Quarters

————— Alltel Corp. (NYSE: AT) —————

Hokie Spirit Memorial Fund

April 16, 2007, will be remembered as one of the darkest days in the history of the Virginia Tech community and the world beyond.

To remember and honor the victims of those tragic events, the university has established the Hokie Spirit Memorial Fund to aid in the healing process and generate financial support.

The fund will be used to cover expenses including but not limited to:

• Grief counseling
• Memorials
• Communication expenses
• Comfort expenses
• Incidental needs

If you plan to give, please click the link below:

Telecommunications (TTH)
Bullish
Sector trading above its…
20-day Moving Average: YES
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment: Investors continues to make heavy bets against the telecommunications sectors despite its strong uptrend. In fact, Wall Street has turned its back on the components of this sector. Of the 162 analysts ratings on the components of the Telecommunications HOLDRS Trust only 31.5 percent come in at a “buy,” while an impressive 10 percent rate them a “sell.” This bearish configuration leaves ample room for potential upgrades. What’s more, the ETF’s short-interest ratio comes in at five times the equity’s average daily trading volume, indicating that investors have yet to shed their bearish bets toward the sector.

Outlook: Technically speaking, the ETF pulled back to support at its ascending 20-day moving average last week and continues to hold support at the 37.50 level. A bounce off these two levels should result in another annual high for the security.

Utilities (UTH)
Bullish
Sector trading above its…
20-day Moving Average: YES
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment: Skepticism is extremely heavy in the sentiment backdrop of the utilities sector. Wall Street has placed some heavy bets against the group as only 27 percent of the 180 analyst ranking on the components of the utilities sector come in at a “buy.” Any upgrades from this dour group could help to add more lift to this sector. Despite the fact that the number of Utilities HOLDRS Trust (UTH ?143.95) shares sold short dropped by 16 percent in March, the ETF still has a short-interest ratio of more than six, pointing to high levels of pessimism still among short sellers.

Outlook: The ETF hit a fresh all-time high last week of 145.35 and is now resting on support at its ascending 10-day moving average. The trust also has additional support in the form of its ascending 20-day trendline climbing into the region to help carry it higher. The security also has strong support in the form of its rising 10-week and 20-week moving averages, which can help to buoy the shares.

Nasdaq-100 Trust (QQQQ)
Bearish
Sector trading above its…
20-day Moving Average: YES
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment: Investors have high hopes when it comes to large-cap technology issues. The Nasdaq-100 Trust (QQQQ ?44.65) continues to see significantly less put activity than the iShares Russell 2000 Index Fund (IWM), whose SOIR comes in well above 2.0. In addition, many of its major components such as Dell have SOIRs in the lower half of their annual readings despite the fact that they are showing signs of technical weakness.

Outlook: From a technical perspective, the trust has rallied back into technical resistance at the 45 level. This region has capped the shares on a number of occasions during the past several months. Furthermore, the 45 strike is the site of heavy call open interest in the April series, with roughly 265,000 contracts in residence. This accumulation of bullish bets could add another layer of overhead resistance to the 45 level. In addition, a number of large-cap tech stocks such as IBM, Intel, and Google have rallied into staunch resistance at their 80-month moving averages just ahead of their upcoming earnings reports. A weak earnings report from these companies matched with technical resistance could result in a sharp decline for the securities.

My stock picks for this earning season:
SNDK, INTV, ANSV and HLS

A short-term question for investors to ponder is, “Will technicians view this move back to the level preceding the February 27 sell-off as an opportunity to sell?” If September 2006 is a guide (which is when the SPX reached the May 2006 peak level), the market sputtered for a few days before ultimately breaking out. What’s more, the market during this period in September saw a very similar winning streak compared to now.

Last week, the financial media allowed subprime concerns to drift to the background as they focused on the fact that NYSE margin debt is now at a peak last seen in 2000. However, this is nothing more than a coincident indicator. In other words, growing margin debt is good until it turns lower. What’s more, had one sold stocks as margin debt was hitting highs through the course of mid-late ’90s, one would have missed a huge rally.

In addition, included in margin debt calculation is short interest, which has grown during the past few years and is contributing to current high number. As you’ll remember, March saw NYSE short interest jumped 9.5 percent. Meanwhile, one fact that has been overlooked by the financial media on this topic is that the amount of free credit, which is associated with selling of stocks in margin accounts, is at significantly higher levels than that of 2000. This would suggest that margin debt associated with short selling is much more than that of 2000, which is another way of saying that we are not at the euphoric levels of 2000, when a higher percentage of margin debt was attributed to borrowing to better leverage long stock positions.

Last week, more stones were added to the wall of worry the market is scaling, as the financial media listed concerns regarding business spending as a chief worry, replacing housing as the number-one worry. Meanwhile, the International Monetary Fund (IMF) issued warnings about Leveraged Buyouts (LBO), while a hedge fund principal made concerned sounds regarding private-equity deals.

Heading into a new week, the economic calendar is heavily loaded with reports. At the top of the list is the Consumer Price Index (CPI), which is set to hit the Street on Tuesday. In the latest minutes from the Federal Open Market Committee (FOMC) meeting, the Fed reiterated its focus on controlling inflation, which caused the market the stumble on Wednesday. However, the core Producer Price Index (PPI) came in below expectations. A smaller-than-expected rise in the CPI or core CPI this week could also help to buoy the market. In fact, an article in the Saturday edition of The Wall Street Journal noted that, “Skeptics warn that the market is one bad inflation number away from another sharp decline.”

In fact, expectations surrounding several of the economic reports due out this week are extremely low, which not only leaves the market less vulnerable to disappointing news, but the market is also in a strong position to rally should numbers surprise on the upside.

With earnings season in full swing this week, a number of big names are slated to step into the spotlight. This week will feature of number of large banks (such as Citigroup (C: sentiment, chart, options) and Bank of America (BAC: sentiment, chart, options) ) and some brokers (such as J.P. Morgan Chase (JPM: sentiment, chart, options) and Merrill Lynch (MER: sentiment, chart, options) ). The financial sector continues to be a heavy weighting in the SPX and with worries about subprime loans, it might be critical for these companies to produce better-than-expected results and/or give investors comfort about future earnings to give the broad market a boost.

It was one month ago Friday that U.S. equity markets heeded the prognostications of most major financial media outlets and put in what was described by Street pundits beforehand as “a much needed correction.” Last week’s action saw the major indices climb within spitting distance of their pre-correction highs in an impressive show of strength.

The big gainers in last week’s trading were the NASDAQ Composite, which added 0.8% (+21) to end at 2,492 and the Russell 2000 adding 0.7% (+6) to close at 819. The big cap S&P 500 gained 0.6% (+9) to end the week at 1,453, while the Dow Industrials managed just a 0.4% (+52) lift. One group of stocks that has not kept up with the month old rebound (and yes, it is still only a rebound until the old highs are taken out) have been most anything financial related.

The main underlying concern these days continues to be anything “sub-prime” related, with even the likes of Dow component General Electric (with a sub-prime unit) not keeping full pace with the recent rally despite a good earnings show last week. The flip side has been Alcoa, another Dow component whose earnings came in higher than anticipated (+9% for the quarter) and has bounced nearly straight back up. The big money, it appears, is going defensive all the way.

We have been left to wonder where all this recent strength has come from (especially with the dollar at two-year lows.) So we just continue to remind ourselves that markets love to climb those “walls of worry” and take it as it comes. That we’re reminded daily there are plenty of worries out there is hardly lost on anyone. So let’s identify the other recurring themes. Inflation fear, rising food and energy prices, slowing profit growth, “tight money” Fed policy and the sub-prime “spillover effect” are all the usual “risk” suspects. Let’s hope these markets can do better than they did, say, twenty years ago October? The closer we get to those April highs, the closer we’ll be to an answer which way this market is headed. Until then…

Stay tuned!

The euro moved sharply higher from the low at 1.0759 and quickly tested the previous highs before it underwent a two week correction. The breakout to new highs was supported by heavier volume and the euro continued to rally sharply, making an initial peak in early 2004. The euro managed to make further new rally highs in February at 1.2919 (point f). In little over a week, the uptrend and the 23.6% level were both broken at point 3, indicating a correction was definitely underway. The 38.2% support level at 1.2093 was also soon broken, which made a decline to the 50% level at 1.1839 more likely. This level was also violated, so it was very important that the 61.8% support level at 1.1584 held. The euro finally made its lows at 1.1745 during the week of April 27th, 2004. The longer term support levels of the rally from .8571 to 1.2919 (not shown on the chart) were as follows: 23.6% at 1.1871, 38.2% at 1.1249 and the 50% at 1.0734. Even though the longer term 23.6% support was broken, the decline held well above the 38.2% support at 1.1249. I mention this to demonstrate that one does not always see the convergence of long and short term Fibonacci targets, as was evident in the prior example.

In the next article I will continue my discussion of the Fibonacci analysis of the euro and take you up through the 2005 peak at 1.3687. Also we will take a look at how Fibonacci analysis can also be used to analyze both the resistance levels during rallies within major downtrends as well as the short-term swings on the intra-day charts.