March 3, 2008
A flurry of late afternoon buying brought the markets to nearly a flat close for the DOW and S&P while the NASD lost a half percentage point. We expected to see further weakness today as the markets continued to come off their overbought conditions. As was the case today, economic data will remain the spotlight this week as investors look for signs on whether the economy will fall into a recession. Expect the market to react to troubling news and seem to forget any good news. Today’s economic spotlight was the February ISM survey of manufacturing declined to 48.3 from 50.7 in January. The forecast was for a reading of 48.0. A reading below 50 reflects contraction for the sector. This number follows weak February manufacturing reports for Philadelphia, New York, and Chicago and is not a major surprise. On a note, things to look for this week include the February unemployment report and the same-store sales for February on Wednesday and Thursday.
As we keep reiterating, we would like for the markets to retest January’s lows and hold before the markets can confidently build a sustainable rally. The more we see these short rallies fail, the more this is becoming reminiscent of a bear market trend. Be patience with our recommended trades as we are being especially careful and looking for select value under the current conditions.
Let’s review the charts…
The NASDAQ had a rougher time of it today with GOOG, AAPL, and RIMM falling in the 3-4% range, and the weakness spilling into the broader technology sector as a whole. It broke out of the lower band of the wedge formation indicating further weakness.
CLICK HERE FOR THE NASDAQ CHART
The S&P was basically unchanged for the day. Unlike the NASDAQ though, we have a ways to go before testing the lows established back in January.
