Finally Something A Little Different

By Duru

May 19, 2005


Just a quick note today to acknowledge that FINALLY something different has happened in the market. The NASDAQ has broken the steep downtrend of 2005 in style. Three days ago I moaned about the prospect of the NASDAQ playing with our emotions around 1999 yet again. The very next day, The Nazz sprinted right through 1999 to 2004, and I thought to myself "Uh oh! What do we have here?!?!" Sure enough, just two more days more, and we now find ourselves at 2042 - a whole 6% up for the month, a month where conventional wisdom tells us the smart money is supposed to sell for a Fall return. Also amazing me right now is the fact that Dow 10K truly did hold as a magic trampoline. Sure the Dow Jones Industrials gave us a few more 10K scares afterwards, but this support has held strong and now the Dow is back above the 50 AND the 200 daily moving averages. The Dow Jones Transports have done the same, and, voila, we have confirmation of a break-out according to good ol' Dow Theory. Again, something a little different: we so rarely get these kinds of neat confirmations!

So after sitting through so many weeks of churn where the market essentially went nowhere, folks are once again excited about the market's prospects. Before we get too excited, I will note how difficult a time the Nazz has had getting passed 2100 the past several years. But trust me, if we get something different again, that is a burst above 2100 and a successful re-test of 2100 as support, I will sit up and take notice again.

I cannot honestly give you a thesis for why the market should be going higher. It just is right now. It is the path of least resistance and sometimes resistance is futile. A great example is the on-going housing boom. Just as quickly as fear spread through the markets about inflation and higher rates, we find ourselves hovering right back above 4% on the 10-year Treasury. Can you imagine how frustrated the Fed must be right now? Look for the Fed to keep hiking rates as far as the spending can spend. Jobs look OK, the economy looks fine again, and speculation is alive and well in the housing market (I cannot believe the stories I continue to read on this!). And as always, we need to be careful out there!

DrDuru, 2005