Free Newsletter: Stalking Stocks with the Shark - Action Subdued Ahead of Long Weekend - 07/6/08

Free Newsletter: Stalking Stocks with the Shark - Action Subdued Ahead of Long Weekend - 07/6/08

Greetings Shark Investors:

Although there was a pretty good possibility that we would see some fireworks a day early, Thursday instead turned out to be a typically quiet pre-holiday trading session. Followed the previous day horrible action into the close in which no area of the market escaped unscathed, indications were for a flat start to the day. We mentioned in our last Stalking Stocks newsletter that part of Wednesday’s late day sell-off could have been due to nervousness ahead of key economic events early in the morning. The first bit of news the market was expecting in the morning was the interest rate decision from the ECB. Recall that over the past several months, Jean-Claude Trichet and Ben Bernanke have been upping their rhetoric in regards to inflation, but when the Fed last met, not only did they not hike interest rates to combat inflation, they also disappointed many who were hoping that they would at least help support a flagging U.S. dollar by adopting a more hawkish tone in the policy statement.

At the same time, however, investors fully expected that the ECB would raise rates in the morning, and that has been reflected over the past few days as the euro traded to just under overhead resistance levels. While investors did unwind some of those positions into the news, it wasn’t until Trichet said that the ECB would have no “bias” in their monetary policy moving forward that the euro really started to lose ground.

The second bit of data was the much anticipated monthly jobs report. Recall that the market sold of sharply after last month’s report showed that the unemployment rate had jumped by a surprising half percentage point to 5.5%, and although expectations were that the headline number would show a relatively benign 60,000 jobs lost, market players were obviously worried that this month’s report might hold more bombshells. However, the actual number, 62,000, was essentially in-line with estimates.

So, even though many market players were braced for the worst, a lack of any major blow-ups or surprises helped the indices start the session off in positive territory. But if anyone was looking for the much-anticipated relief rally to take hold, they were likely disappointed, because after a couple of quick whipsaws in the first 45 minutes or so, the averages settled down in to a tight range for the reminder of the abbreviated trading session, finishing the day in mixed territory. Looking at the leader/laggard relationship, it wasn’t too surprising to see that industrials and consumer discretionary bounce a bit after the absolute drubbing they’ve taken recently or that financials were once again weak. What was interesting, however, was to see energy-related names show weakness despite the fact that crude traded near record highs for most of the session.

Regardless, trying too hard to find much meaning in Friday’s trade is a waste of time. The data in the morning gave us a few more pieces of the puzzle, but the action in between the bells was nothing more than a typically thin, lackluster holiday session. The one thing we do know, however, is that this market remains badly broken, and right now, accepting that the trend is down is the best way to approach things. Ultimately, there will be tremendous opportunities in this market, but until that actually happens and stocks begin to trend higher, individual investors are better off leaving the bottom-fishing to those who are required to be fully invested in a market that keeps moving lower.