The Pause That Refreshes?

June 1st or 4th. That was the peak for most of the market indices. Since then the market has bounced within a 3-4% range. The Small and Mid indices are more toppy looking than the Large indices but that may be a function of their stronger rallies to date. On the surface, nothing looks really bad and most look like they have sold off towards bases and are establishing good backing and filling action. The single most troubling items are the softness in the A/D line - the generals cannot rally indefinitely without the troops - and failure of the new high list to surge ahead. On a 10 day moving average basis, the peak in May/June highs was lower than April that was lower than February that was lower than December. Bad trend there. Looking into the stock list gives a mixed bag. The best stocks are still doing their thing...TU, CBEY, SBS, DECK, GOOG, AMX, PCU, OSG, these are all good. But GS may be topping as it cannot escape the gravity of BSC, LEH, MER, etc. AAPL has put in a short term top but has gotten so far ahead it really needs a rest. Note how AAPL peaked right into the much hyped launch of the i-phone - buy the rumor sell the news sort of action. I don't believe AAPL is over but expect it to lay low until earnings are released and news/numbers of the i-phone launch are confirmed (mid July). RIMM is a little soft and i attribute that to concern for earnings but I expect a blowout from them as their new consumer products have been well received as far as I can tell. We'll see about that soon as well - this Thursday or Friday. Any lower on RIMM without a volume surge or trend/support violation and I might take advantage of that weakness, too.
Mostly our market action has been limited with a few positions stopped out during the month. Yesterday we sold a number of stocks that appear to have topped out and which I have little faith for strong performance from here. Overall, it's all ok. It could take this market no time to repair itself or this could be the beginning of the end. We all know that the market is capable of nearly any move in the short term. However, best bet is a consolidation that lasts another 1 - 3 weeks. Most of the downside price action has probably occurred and this is just time and volume filling in. I would expect that if earnings are good then stocks will launch themselves higher off the base that has been built since the first trading days of June. As always, stay tuned!

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