Out Of Breath?

The five-week upward trajectory faltered this week and markets appear to be setting themselves up for their usual seasonal pattern. I’ve been watching and waiting for precisely that situation to play out. Prices are almost surely going lower over the summer and we’re already positioned to take advantage of that (by having sold most of the portfolio earlier this year at substantial profit. See the Strategies page for the record). We may get even better positioned next week.

What changed the mood? The slowest reported job creation rate in two years, plus the not-shocking-whatsoever notion that slowing economic growth may eat away at corporate profits. Too, there appears to be no reason to think that the Fed will stop or slow its rate-raising campaign.

Then, although not officially on Wall Street’s radar but permanently fixed on my own, is the fact that summer is upon us. That will further strain oil prices for the driving season and higher prices at the pump generally translate to lower prices on the stock market.

We’ve benefited greatly from this recent, surprisingly strong rally, and it’s time to think about paring back for the hot months and lower prices dead ahead.

Ultra Semiconductor closed the week higher than last and is now up some 11%. Disney is up 82%, Pfizer is still flat, and Microsoft is up 13%. While Dow 1 is up 4%, the Dow itself is down 2.6% and Double The Dow is down 6.6%. The only one I’m considering selling is Ultra Semicon. I don’t want less than a 10% profit. As always, I’ll keep you informed on this page and via my free email list if and when I sell.

The stocks I’ve traded successfully in the past include Sun and Maxtor. Sun is at $3.66; Maxtor is at $5.80. Neither is a compelling buy yet. I will look to buy Sun somewhere below $3.40 and Maxtor somewhere below $4.40.

There’s some interesting action happening in Treasuries. The yield is just under 4% after dropping to 3.8% briefly on news of the slow jobs creation. That means prices are high. Some would say very high. The dollar’s 7-month climb is looking creaky. I believe that the dollar and Treasuries are in for a correction, and I’m looking for ways to capture that. Again, stay tuned.

Here in Japan it’s rainy season, but not yet deathly hot so I can still occasionally get in a pleasant walk by the river. I hope you’re similarly enjoying the season wherever you live.

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