Monday, May 22, 2006

Modest Strength Into The Close

The market was weak most of the day, but did embark on a spirited rally in the last hour. The SPX climbed its way back into positive territory, from a greater than 1% decline, but finished the day down -0.4%. The mid-caps (-0.8%) and small-caps (-1.0%) lagged their large-cap bretheren.

Utilities were the strongest today, as bond yields fell briefly below the 5.0% level. Chip stocks were hit the hardest (-4.2%), but I expect them to experience a strong bounce this week.

Despite today's declines, volume levels were modestly lower. So Friday's initial rally attempt is still intact, and I expect to see some follow-thru days this week. Breadth was fairly negative today, which is just pushing the oscillators/stochastics further into oversold territory.

Also, measures of investor anxiety rose again today, with a sharp spike in the volatility indexes. The fact that more market strategists aren't rushing to call this a great buying opportunity actually makes me a bit more emboldeded.


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