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Strategies & Market Trends : IPO and Other Stock Plays -- Ignore unavailable to you. Want to Upgrade?

To: david777 who wrote (12543)	5/17/2005 10:39:01 PM
From: david777	Respond to of 13331

WEDNESDAY: The CPI gives the next real peak at the Fed's view on inflation, and it is out before the open. PPI is volatile, CPI is less so. Thus far some pricing is moving through, but it has been on pace with the Fed's target. That has kept the Fed at a 'measured' pace in rate hikes. If the Fed sees the CPI moving beyond its 1.7%ish target, that will incite discussions of 50 BP rate hikes. We know there is already at least one governor on the FOMC pushing for 50 BP hikes. CPI will have its impact, but overall the indices have been somewhat surprising, refusing to roll over after some distribution last week. The rebound has not been a showing of strength, but Tuesday was not completely feeble. The action shows basing, and it shows there is still a battle between the sellers and the buyers. The sellers appeared to get the upper hand last week, and now the buyers are having a go at it. The result: down and up in the base for the past six weeks, trying to put in a bottom. Thus far this year the market has given a thumbs down to the Fed action and the future. Of course, the market looks much further ahead than the financial stations. It is already pricing in what will happen 9 months or more down the road. The first five months of 2005 have been weakness. Now it is trying to put together a bottom; it may or may not work depending upon the read it gets on the Fed given the CPI and other data. At some point it will either get comfortable with what the Fed is doing, figure out the Fed will be stopping, and then start to rally. If it decides otherwise it breaks down through the floor of this more or less lateral move to end April and thus far in May. At the moment it is simply sizing up the future, and the buyers and sellers are pretty evenly matched. The next key tests in this base are coming. The May high is first for SP500, then for SP500 and NASDAQ it is the April high. If it can overtake the April high (and it may fade from that level and then try again before it succeeds) that is the strongest indication thus far that the market has come to grips at least partially with what the Fed is going to do in the future. Given the bond market action it is problematical at this juncture. As for stock leaders, there are still many performing pretty darn well, working in a stair-step approach, though many are using baby steps.