Börsipäev 22. veebruar

22.02.2005 16:18

Rev Shark:

Market Facing Some Tough Obstacles
2/22/05 8:12 AM ET

Life's challenges are not supposed to paralyze you, they're supposed to help you discover who you are.

-- Bernice Johnson Reagon

As we kick off a new week, the market faces some substantial challenges. We will need to be particularly vigilant this week as we are at a particularly important juncture and paralysis now can be very costly.

We have some positive, and negative, developments. If the negatives take hold -- which looks like a good possibility -- we will need to be very aggressive in protecting our capital. We've had a decent bounce in certain sectors of the market recently and we can't sit idly now and let things slip. However, if the bulls can pull themselves together and push this market up, we will need to trade very aggressively in order to profit. There are some pockets of strength, such as pharmaceuticals, oils and steels, that offer opportunity, but we can't be passive if we hope to profit.

Despite the fairly good technical picture of the S&P 500 and the Dow, I am not feeling particularly bullish about this market. The Nasdaq is obviously a laggard and the senior indices can only shrug off weakness there for so long before the technology stocks infect the rest of the market.

Another concern is weakness in the financial sector. The Philly Bank Index (BKX) closed Friday at its lowest point since early November of last year and is poised to test its 200-day simple moving average. With both technology and financials struggling and defensive groups such as oils, precious metals and drugs leading, it is quite a stretch to consider this a healthy market even though both the DJIA and the S&P 500 are just slightly off multiple-year highs.

I'm taking a very defensive posture right now with a high level of cash and a short time frame for any new trades. This looks like a particularly good time to explore the short side of the market if you are so inclined.

I have to admit I'm not feeling very in tune with the market at the moment and I am being very careful about staying objective. My wife contracted a rather nasty antibiotic resistant infection called MRSA from her C-Section surgery. It has been a challenge to deal with that and take care of the new baby, and that is very likely to impact my market perception to some degree. It's important to stay aware of things like that which may color our thinking. My thanks to Cody Willard once again for filling in and doing a superb job.

The early action this morning is very poor, with a spike up in crude oil toward $50 and a weak dollar taking most of the blame. Overseas markets are weak and precious metals are up sharply.

It looks like we are in for a bumpy ride.

Gary B. Smith:

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