Friday, June 8, 2007

You Knew Friday Would Be Good, Didn't You?

After taking a three-day beating, US investors struck back with a vengeance, sending the Dow up more than 150 points in a broad-based rally that took all indices higher.

Dow 13,424.39 +157.66; NASDAQ 2,573.54 +32.16; S&P 500 1,507.67 +16.95; NYSE Composite 9,826.07 +105.13

Even though the volume wasn't quite as brisk as yesterday's, it's worth pointing out that money is on the move. The same stocks that were beaten down on Tuesday, Wednesday and Thursday were not bought up on Friday. Sector rotation - and migration from blue chips to techs - and repositioning is what this week was all about.

Investor confidence was buoyed this morning by news that the trade balance in April shrank to a point that we imported only $58.5 billion more than we export. Most analysts were looking for upwards of a $63 billion imbalance. While the number is still shocking, any improvement is positive for the US business and labor markets, and, to some degree, the country as a whole.

Advancing issues overwhelmed decliners by better than 2-1, and while new lows still outdid new highs (159-108), that reading is less frightening than a day ago. Understandably, stocks were moving in both directions, but there was still some leftover selling to be done on some of the dogs. What would be good to see in the high-low reading is a period of fluctuation, indicative of a market settling in, readying for another leg higher, which is undeniably in the cards.

The dollar strengthened against the Euro on the day, which was another good sign and the price of crude was drubbed back to a more realistic level, losing $2.17 to close the week at $64.76.

Once again, the metals took a beating. Gold was down a whopping $14.90 to $650.30. Silver lost 44 cents to close at $13.04. This signals defeat for the proponents of $800 gold and $20 silver. That bull has all but died a painful death.

Overall, it was a week of readjustment, albeit lower, but the markets are primed for some colossal gains in coming months.

No comments: