Dallas, TX
June 25, 2010, 08:00 EST		 Dr. Joe Duarte's Market I.Q.


The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors

Rally Fails To Fully Close Deal With Bulls
What's Hot Today:

Investors will be looking to end the week on an up note. But it will be difficult given the technical damage caused by the last four days of trading this week.

Today's Economic Calendar



News For Thought

Supreme court may throw out Sarbanes-Oxley act. According to The New York Times: "The timing is exquisite. First the Supreme Court of the United States provided a significant legal victory to the mastermind behind one of the greatest corporate frauds in American history. Next the court may throw out the law that Congress passed to reform corporate America — a law inspired by that very fraud. The end of a Supreme Court term is often the most interesting. The cases that produced the biggest arguments are delayed until the last minute — and that minute is upon us. The term ends next week. It is expected that the final rulings will appear on Monday. It is then that the court will decide whether to throw out the Sarbanes-Oxley Act. If it does, it will use the same basic argument it used Thursday. It will blame Congress for writing bad laws."

House postpones 21% Medicare pay cut for physicians by six months. According to The Wall Street Journal: "Congress approved on Thursday a bill that averts for six months a planned reduction in fees paid to doctors who treat Medicare patients. The House voted 417-1 to pass the measure, a week after the Senate confirmed it unanimously. It means that a pending 21% cut in payments to physicians that see Medicare patients will be delayed through the rest of the year." In January, though, another several percentage points will accrue, and there may not be a fix. As we've said many times before, stay healthy. There may not be a doctor that wants to see ill patients in the U.S. within the next few years.

 


Rally Fails To Fully Close Deal With Bulls
Technical Breakdown Is Clearly Worrisome
The S & P 500 (SPX) finished Thursday's session just 40 points away from its recent lows after failing to close convincingly above its 20, 50, and 200 day moving averages over the last four trading days. The reversal clearly changes the fledgling but clearly fragile rally of the last few weeks, raising uncertainty going into the weekend.



Chart Courtesy of StockCharts.com


The damage was signficant, but may not be the death of the rally. For one thing, the market's recent breadth, as measured by the NYSE advance decline line (NYAD) did not fall as much as the S & P 500. Still, the NYAD does have some distortion due to the presence of preferred stocks and bond related issues. These income producing quasi-equities sometimes hold up better than plain stocks and distort the picture.



Chart Courtesy of StockCharts.com


The Russell 2000 Index (RUT) of small stocks may be a truer picture of what's really going on in the average growth stocks. This index lagged the S & P 500 on the way up from the June 7 bottom, and broke down fairly hard this week.



Chart Courtesy of StockCharts.com


The news this week has been mixed. And Friday will deliver more data. Still, the politics are heating up and the incumbents are starting to worry, which means that more crazy stuff is likely from Washington, possibly spooking stocks further.

Conclusion

The speed and severity with which the rally has failed is pretty impressive. We have added some short selling ETFs to our ratings list and have tightened some stops lately.

We continue to remain conservative here and will be monitoring things closely.

We'll be on Twitter some time today before the market closes with some updated comments.

Know when to sell and how to make money when the market falls. Get a detailed trading plan in your pocket. Read Dr. Duarte's All NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for All Seasons. Also Available As Kindle Books.

 

Market Moves - Stock Of The Day
Darden Inc. (NYSE: DRI) Breaks Down On Poor Sales
Casual dining kingpin Darden Inc. (NYSE: DRI) broke to a new low on Thursday, suggesting that consumer stocks may be in for a tough summer.



Chart Courtesy of StockCharts.com


Casual dining stocks are reliable market indicators. For one thing, when they rise, it's usually because money managers are sensing the presence of a strong consumer. Strong consumers go out to eat at casual restaurants.

People without jobs usually stay at home. And people who skipped paying their mortgages and used their credit cards to eat out last quarter, may have run out of credit this past quarter.

Its' never easy to figure out why things happen, at least not for a while. But Darden's most recent earnings report disappointed investors as sales fell shy of expectations in their fourth quarter and for the whole year. In fact, the entire restaurant group took a hit on Darden's news.

Our recent forays into casual dining shops show moderate seating, even during peak hours. During our drive to Austin on Thursday, we stopped at a Johnny Carino's, Brinker's Country Italian entry into the field and got in with no trouble. The place was about 3/4 full at peak dinner. There was no waiting line.

Other restaurants in the district, which we drove by, showed parking lots that were from one half to a little more full for dinner.

The bottom line seems to be that investors aren't interested in restaurant companies that have decent, at best, cash flow, with small profits and low margins. And that seems to be what you get when your restaurants can only pull in half to three quarter full houses during dinner in prime locations.

The action in shares of the group suggest that investors are betting on things getting worse.

Follow Dr. Duarte on Twitter
 

 


Other Subscriber Reports are located on the website (log in required). These
reports are updated on a weekly basis (or as conditions require) and are not emailed:

S&P Timing  /  Bond Timing /  Dollar Timing /  Energy Timing
Gold Timing /  Tech Timing /  Biotech Timing

© Copyright 1996-2010, Market Timing Strategies, Inc., All Rights Reserved.
  • Market IQ reports may not be redistributed without permission.
  • Joe-Duarte.com is independently operated and solely funded by subscriber fees. This web site and the content provided is meant for educational purposes only and is not a solicitation to buy or sell any securities or investments. All sources of information are believed to be accurate, or as otherwise stated. Dr. Duarte and the publishers, partners, and staff of Joe-Duarte.com have no financial interest in any of the sources used. For independent investment advice consult your financial advisor. The analysis and conclusions reached on Joe-Duarte.com are the sole property of Dr. Joe Duarte. Dr. Duarte is a private investor and a financial journalist. He trades for his own account. He discloses any positions that he has open in any stock or exchange traded mutual fund that he writes about. Dr. Duarte offers commentary and analysis about the financial markets. Dr. Duarte is not providing investment advice.