The Big Picture | Another day, another 100 points

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Another day, another 100 points

Thursday, June 05, 2003 | 10:52 AM

The market's current momentum continues unabated. So far, Dips have not gotten very far, as buyers await any and all discounts. Internals remain very strong: 25 to 8 positive advance-declines on NYSE, 22 to 10 on Nasdaq, with strong up/down volume. Nasdaq volume neared 2.5 billion, with over 1.8 billion on the upside, a strong 3 to 1 up/down volume advantage. NYSE was even stronger at 6 to 1.

The Bears have been panicked into covering short positions, regardless of price. The Bulls are deathly afraid of being under-invested, with last week’s pullbacks described as “healthy.” Until some force intervenes to derail the momentum, the market could easily move higher. What could send the locomotive off its tracks? Here are a few issues definitely worth watching:

· Insider selling Corporate insiders have sold more than $3.1 billion worth of stock in May. The WSJ notes this is “the most such selling in 24 months.” Though far from being perfect indicators, insiders are at least implying that corporate executives have major concerns about the alleged 2nd half economic recovery.
· Too many Bulls Chartcraft.com Investor's Intelligence shows the bulls now number 56.5%, while the bears are at a low 20.7%. Unless the bulls are woefully under-invested, its hard to see how much higher the market can run without the “Wall of Worry” getting rebuilt a bit.
· Pre-Announcement Season for Q2 2003 is now underway; We’ve already seen some surprises from minor companies; The good news is year-over-year comparables are easy. Intel’s Mid-Q conference call tonight will be a major tell for the tech sector (Expect a neutral report).
· Fed Rate Cut Already Factored In The yield on the two-year Treasury note fell below the fed funds rate; This relatively rare event suggests that a Fed cut is imminent. Is this an insurance cut, as some Fed members have suggested? Or, is it a sign that the Fed is getting nervous?
· Technically Tired? Some momentum indicators are at all-time highs. The markets closed at the top of their intermediate up-channel, an area offers resistance, and reflects overbought conditions. The recent “spike-up” also implies too-far-too-fast. A digestive pause, or a “back-and-fill” may be needed before the march forward continues.

The trend is your friend, and the trend remains up. Until it reverses, scaling into pullbacks is the desired way to get long.

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Quote of the Day: "The bizarre question about why Sosa would need a corked bat in the first place–much less for practice–is almost as crazy as why multi-millionaire Stewart would risk her homemaking empire to save $40,000 in losses through an insider trade; Hubris: It's not just for breakfast anymore.” -David Callaway, Martha and the Sammy Sosa defense