Market Soapbox 05/10/05

Resistance: DJIA 10400; SP500 1180; Nasdaq 1980; NDX 1465
Support: DJIA 9900 ; SP500 1125 ; Nasdaq 1870; NDX 1375
Positive: BioTech
Weak: Everything Else
52 Week HiLo: NYSE 77/36; Nasdaq 46/81; Amex 36/34
A/D Volume: NYSE 302/1417, Nasdaq 396/1075, Amex 15/195
Volume: NYSE 1.744B, Nasdaq 1.568B

Upcoming Notable reports:
WEN: Treasury Budget & Trade Balance (Feb -61B, est. -61.2B)
THUR: Initial Claims, Retail Sales, (ex-auto)
FRI: Business Inventory, Export Prices(ex-ag), Import Prices(ex-oil), Michigan Sentiment Prelim

European (DAX -0.96%) & Asian markets (Nikkei 225 -0.11%) were down. Dollar down vs. Yen/Euro, gold, bonds, oil & commodities up. 10 year note +16 ticks, yield -.066 @ 4.22%. Oil: +0.08% @ 52.07 Contra action: None

Today's Sooey Pig Pig!! award goes to the media for putting a wild spin on todays market action.

The spin: "weighing on sentiment has been broad based weakness in overseas markets, speculation that Friday's payroll data was overstated." Sniff, Sniff.

"Further validation of a global economic slowdown - following the largest drop in UK retail sales in a decade. High expectations for upcoming bond auctions. The sell-off in equities helped underpin buying interest in Treasurys." Root, Root.

The reality: Late night CNBC World Europe covered the drop in UK retail sales, and experts indicated the numbers were an anomaly and taken out of context. Much like the 100K overshoot on Non Farms.

More reality: The Treasury Dept. sold $22B in the 3 year note auction, indirect bidder participation (foreign central banks) came in at a decent 40.3%, compared to an average of 38.3%. And there are 2 more days left in the auction.

Dealer cash is tied up in the auction, stocks must be sold to free up cash to buy the bonds. Options are unwinding for next week. There are solid shorts in the market, which has attracted buyers looking to force out weaker hands. Spook the herd is the mantra. Oink, Oink.

Amazing how the tone of the market and the tune of the media changed overnight. Anyone who has been paying attention to these pages, can't say they were not warned.

The market gapped down then drifted down & sideways till 1:30EST then on higher volume got pushed over a cliff in flames into a sea of red. 10 of 10 sectors & 28 of 30 Dow components down.

Some would call it unusual for bonds to rally into the face of supply, but some of us are savvy to this game. Biotech getting a bid for the 9th consecutive day.

Various reports have been circulated about hedge funds having problems because of the recent movement in GM's stock and bonds. Sniff, Sniff. For more on this juicy truffle which has much to do with todays action, see today's "Junk My Car" post.

The indices bounced off resistance for the 4th time and fell. They have been attempting to break these levels on a closing basis for several days.

The bond auction, options unwind and expiration, and the GM derivatives fallout could slam the toilet lid down and provide a nice healthy flush out next week.

Tomorrows Trade Deficit and Budget should not help matters from an economic outlook. But we have been surprised by Gubmint numbers before.

We should see a continuation of todays action, to a lesser degree, combined with sideways action through mid day Thurs. This is when the auction ends and things may stabilize until Wens next week. Just my opinion, I could be wrong.