January 25, 2008
The market finally concluded a week where the major indexes finished in positive territory. Even in the midst of a respectable sell-off on Friday, after gapping open at the bell. Nonetheless, with this week behind us, we need to start looking towards next week. It is fair to say that there is no one who knows how the market will act with the flood of events and news expected to come out. On Monday, we have President Bush’s State of the Union Address in which he will undoubtedly address the concerns of many in regards to the economy, along with the stimulus plan both he and Congress are trying to push through and into the consumer’s hands.
On Tuesday the Federal Reserve begins its two-day meeting in which on Wednesday will announce its decision on interest rates. Many are expecting a 75 basis point cut, while in reality, we at Shareplanner are not expecting anything more than a 50 basis point cut. The reaction to a 50 basis point cut will likely be widely accepted by the market, while a 75 basis point cut will send the market into euphoria. Anything less than a 50 basis point cut will cause the markets to sell-off, in which case it could get very ugly, very fast. There are also many economic and earnings reports to come out next week too, so there will be no shortage of market-impacting stories.
So, don’t try to predict anything, let the market come to you, and make your decisions off what the charts are telling you. Preserving your capital at this stage in the game is extremely important, and we encouraging you to not take on any new positions that could cause unnecessary losses to your portfolio.
Let’s review the charts…
After opening up strong on the day, the NASDAQ gave back all of its gains and more closing down 1.5% on the day. The NASDAQ seems poised to test its lows once again next week. Whether they hold or not will likely determine whether we snap out of the bearish market.
S&P’s day was no better giving back its opening gains and selling off continuously the entire day and closing at its lows. Volume was a bit higher today indicating that the bears were beginning to test the waters again for another possible sell-off.