EARLY RALLY FADES -- MARKET STILL CONSOLIDATING
MARKET AVERAGES END BACK UNDER 200-DAY LINES... This morning's upside break through 200-day moving average lines didn't hold thru the close. Charts 1 and 2 show the Dow and the S&P 500 closing below that stubborn resistance line. Although the afternoon price fade was disappointing, market internals were positive. There were more gainers than losers on both the NYSE and the Nasdaq. Upside volume also exceeded downside volume. Strangely, total volume was relatively light. We're not inclined to view today as an important failure. With our daily and weekly indicators still in positive alignment, we're more inclined to believe that the market is consolidating within an intermediate advance. That may suggest a bit more "backing and filling" before the market tries the upside again.
Chart 1
Chart 2
BIG BOARD WINNERS... Two of the biggest gainers on the big board were Alcoa and AOL Time Warner. Alcoa gapped to an almost three-month high on heavy volume. As the chart shows, however, AA closed near the lows of the day. At the very least, that suggests that the early bounce was overdone. It may need to fill some of the underlying gap left behind this morning. AOL Time Warner held onto to most of its early gains. The stock hit a two-month high on good volume. It's now in position to test its 200-day average.
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NASDAQ WINNERS AND LOSERS... TMP Worldwide was one of the biggest winners on the Nasdaq. The chart shows the stock closing well above its 200-day moving average -- and on good volume. Genzyme General was one of the Nasdaq's biggest losers. The good news is that volume was light. Even so, the price drop contributed to a down day in the biotech group.
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MONEY MANAGEMENT UPDATE... The Decision Model used at MurphyMorris Money Management has shown improvement over the past couple of weeks. The technically-drived Model rates the market environment as "positive". In addition, our three risk measures are now "positive" as well. We've added some money in the best risk-adjusted mutual funds. That means equity mutual funds with good relative strength, but relatively low volatility. We're now in the process of monitoring those new positions on a daily basis. Our Decision Model tries to capture trends of "intermediate" degree -- and isn't designed to trade "short-term" moves. Chart 7 shows one of the funds recently added to our portfolio (plotted through Friday).
Chart 7
