Analysts, Gurus & Pundits: Todd's Market Forecast

» Normxxx - Todd's Market Forecast

By Steve Todd | 15 April 2005

http://www.toddmarketforecast.com

  DOW            -191 on 1700 net declining issues 
  
  NASDAQ COMP.   - 39 on 1600 net declining issues

STOCK MARKET ANALYSIS:

A weak market was hit by a phalanx of bad news on Friday. IBM got it started last night by reporting disappointing earnings. Then several reports suggested a weakening economy and a decline in consumer confidence. Finally, import prices gave a whiff of inflation. It was simply too much for a market already on the run.

Of course, we didn't know any of this when we went bearish for the intermediate term in late February. Just to reiterate, when the S&P 500 tested it's high on February 15, the Nasdaq Composite was nowhere near a high. This set off an alarm to us and the relative weakness for the non listed market is still with us. That needs to change before we get a meaningful uptrend going.

However, help may be on the way. We took note that the volume was huge on Friday. Normally, a decline on heavier volume is bearish, but a big decline on enormous volume is frequently a give up day for the erstwhile bulls and this frequently takes place at an inflection point.

We would expect a short lived rally of a day or three to get started early next week, followed by a retest of the lows. If the Nasdaq or small caps show relative strength on the retest, we may very well have our bottom. The financial media reported on Friday that this was the worst week since March of 2003. That just happened to mark a major bottom.

NEWS AND FUNDAMENTALS:

Industrial production rose 0.3%. This was in line with expectations. Capacity utilization was 79.4, a bit less than the anticipated 79.6. The New York Empire State Index was a very disappointing 3.1, down sharply from the consensus 17.3 and lower than last month's 20.2. The preliminary April University of Michigan sentiment survey was 88.7 which was quite a bit less than the consensus 91.7. Finally, import prices rose 1.8% in March due largely to oil price increases.

On the stock front, General Electric beat estimates, but could only manage a 1% gain. Citigroup also beat the consensus and rose 2%. Cree Inc. jumped 13% on earnings. Eli Lilly added 6% on news that a judge had ruled its Zyprexa patents valid. Genentech surged 19% on favorable news about Avastin and breast cancer. Starbucks moved higher by 2% after an upgrade by Bear Stearns.

On the negative side, the aforementioned IBM lost 8%. Avery Dennison, and RF Micro devices guided lower and lost 12% and 13%. Alloy Inc and Mattel came up short on earnings and sank 17% and 7%. Eastman Chemical was downgraded by J.P. Morgan and lost 5%. Sun Microsystems gave up 8% on a revenue shortfall and finally, Network Appliances lost 5% on a downgrade by Bear Stearns.

BOTTOM LINE:

Our S&P and NASDAQ intermediate term systems are on a sell signal from the close on February 22, 2005. Let's stay there for the present, but be on a buy alert.

SPY and QQQQ traders are in cash. Stay there for now

For new subscribers, the QQQQ and SPY are exchange traded funds or Spiders. The former mimics the Nasdaq 100 and the latter mimics the S&P 500. ---- Additionally, an m.i.t. order means “market if touched” It means that your order becomes a market order if the price is touched.

OTHER MARKETS

We are on a buy signal for bonds.

We are on a buy for the dollar and a sell for the Euro.

We are on a sell signal for gold.

We remain long term positive on all major world markets, including those of the U.S., Britain, Canada, Germany, France and Japan.

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

The content of this message is not to be construed as constituting market or investment advice. It is intended for educational purposes only. Individuals should consult with their own advisors for specific investment advice.

-- posted by Normxxx