7.06.07

7.06.07

Stocks rallied Monday and closed at session highs as a wave of deal making on the first day of July restored investor confidence following a drop in M&A activity last month. All 10 economic sectors finished sharply higher while the Dow, S&P 500, and Nasdaq rose 1.05% on average. After weeks without the typical Monday morning merger news that had helped so many indices hit all-time highs during the first half of the year, a flurry of big-ticket deals today helped quell the worst of fears that the private-equity buyout party was over. The rest of the week was a non-event. Tuesday the market closed early, Wednesday was the holiday, Thursday and Friday the volume was so low that it couldn’t be given any real meaning. The Nasdaq 100 closed 2.80% higher on the week while the Russell 2000  and S&P 500  respectively gained 2.23% and 1.80%. Limited participation, however, as the NYSE barely saw 1.0 bln shares exchange hands, indicated there was little conviction on the part of buyers.  It also raised questions about the sustainability of recent gains heading into the start to the Q2 earnings season on Monday. We are back above resistance at SPX 1522 where the market stalled twice before. Hopefully this time will be the one that breaks out. The odds point to SPX 1560 as the target for this advance. Not that is has to end there or even that we are guaranteed to get there, but that the SPX should eventually reach that level in coming weeks.

            The troubling part of this market is that its current leadership is dependent upon the Energy sector, which in turn is dependent upon oil to go up in price. It closed out the week in the range of $73 a barrel, the highest in 11 months. Gasoline prices didn’t follow suit as they normally do. High gas prices are bad for the market. Watch for the answer next week. We still have a PPP in effect, and though it is difficult to see a nice weekly return pass us by as it did last week, it was the right call for those of a conservative bent. We lost opportunity, but not money.

Till next week

The MTA  Staff