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Quiet End to Wicked Week - Money Matters for 10/07/05 Don Bravo | 10/07/05
As the sun sets slowly into the west and Manhattanites head home amid driving rain and terrorist threats, the US equity markets on Wall Street closed out a week that many traders would rather not remember.
After a quiet Monday, the indices were rocked for three consecutive days before closing out the week with minimal gains on Friday. Probably the best tonic for the markets was this morning's Labor Dept. report for September, which showed the US losing only 35,000 jobs. Many were expecting losses in the 150,000 - 200,000 range, though data for September may still be spotty due to the hurricanes that wreaked havoc on the Gulf coast states.
Regardless of today's tame trade, the markets as a whole seem poised for a further fall. Today's tepid tone on the Nasdaq in particular marked one of the lowest volume days in some time, while volume on the NYSE was a bit more brisk.
Traders were definitely squaring positions in anticipation of earnings reports which begin with a flurry next week.
Despite today's paucity of activity, the one metric showing direction is the new highs - new lows, which flipped into the negative on Tuesday. I follow that reading closely and it nearly always predicts direction after turning over. Today marked the third day in a row that new lows outnumbered new highs, and though the spread did not expand, it remains fairly wide.
The other notable is the resilience of the NYSE Composite, which got somewhat of a kick compared to the Dow and Nasdaq. In fact, over the past year, the Composite has proven 5% better overall than the Nasdaq and beat the Dow by a solid 10%. Those diehards of the S&P 500 also saw the NYSE beat them by 6%.
What that means in the real world is that the best bets continue to reside in mid-cap and small-cap stocks on the NYSE and Nasdaq. The Dow continues to underperform and eventually, traders will take the 30 blue chips to the wall and summarily execute them, in a classic "shoot the generals" scenario.
When that happens, we'll witness a 200+ point decline on the Dow and subsequent losses into the new year. I'll be sure to keep you up to date.
Have a nice holiday weekend and get ready for some serious action on Tuesday. The markets are open on Monday, but action is likely to be slow.
BY THE NUMBERS
Dow Jones: +5.21; 10,292.31 close
NYSE Advancers: 1972
Nasdaq Advancers: 1709
NYSE New Highs: 38
Nasdaq New Highs: 48
Gold: +2.70; 477.70 close
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