DJIM #46 2010
Monday, November 22, 2010 at 07:24AM Heading into a shortened trading week, the 3 main issues grounding the market seem to have dissolved to a point by recent actions. Firstly, Ireland has been ‘forced' into a bailout, but details will take days, if not weeks to come out. Secondly, China’s RRR hike on top of other inflation fighting techniques announced last week seems to show they will do anything but use monetary policy ‘hikes’. Third, tech Oct end earnings have mostly refuted CSCO’s concerns ( till Q4 reports). (HPQ BRCD ahead). http://online.barrons.com/article/SB50001424052970204076004575616732157163518.html?mod=BOL_twm_col
In all, on top of last weeks positive Eco data (inc. retail reports), the market should be relieved some and enjoy what is usually a ‘positive’ trading bias in the holiday week. Still, in no way is this the last you will hear of the consequences of these 3 issues, it’s likely just a temporary relief, at least for the holiday period. Eg. Irish bank haircuts as a bailout result…we may get more contagion issues show up (Portugal)…a bad tech guide ..more China curbs??
As far as how the week finished, the market pullback to the high 1180’s on Friday and the first sign of intraday dip buying coming back showed up. This ‘shallow pullback’ is a better sign than what was primarily a short covering rally the day before as it shows buyers are willing to step back up. A good 'traders' sign is individual equities/sectors(retail) are not so correlated to the broad market tape now. Eg. We saw 3 earnings noted here last week all trading higher as buyers pick up quality…CRM being the highlight. Simply, if you stay selective, the broad tape action should not matter.