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Morning Cup of Jo: The Distraction Remains the Same


...the Fed remains data dependent and the markets are learning how to deal with an era of greater openness at the Fed...


"There is no substitute for paying attention."
-- Diane Sawyer

The 113th Morning Cup of Jo written on 06/06/06 – is this telling us something?

Since Friday's Iran pre-market news about the Country's uranium enrichment program, the four sisters were stopped dead in their tracks on the upside and once again began continuing the rubber-band action seen on the last 4 major bottoms put in on the LT trend since mid-2003. Like stated in last weeks 'Jo,' "…don't be surprised to see 100 point swings either way in the Dow, which has become extremely indicative of the markets attempting to find a ST bottom."

At the beginning of this week the downward action was precipitated by Ben Bernanke's seemingly hawkish comments, which not only accelerated the market sell-off but raised the Fed Funds futures for the month of June from below 50% to above 80%. This translates to the probabilities of the Fed raising another 25 basis points in an attempt to further stem inflation.

As for now the distraction remains the same; the Fed remains data dependent and the markets are learning how to deal with an era of greater openness at the Fed. However, we should point out that our numbers in the above "Eye on the Ball" did change yesterday. Yesterday the ST support of 11,030 gave way on the Dow to set in a new ST support around its 200-DMA (10,900).

Dow Jones Industrial Average:

(Click to see larger image)

Only time will tell if the other 3 sisters continue their congestion and continue to hold their ST supports before retesting the upward side of the most recent trend break, or if they will go further down to test the LT trend since mid-2003.

S&P 500:

(Click to see larger image)


(Click to see larger image)

Russell 2000:

(Click for larger image)

Like stated in Friday's WIR, the action over the coming weeks and months will determine if we are entering a cyclical bear market or just another whipsaw before attaining new highs. Whichever the case, keep your "Eye on the Ball" and watch the ST trends for further signs of weakness; this could be the tell that preludes additional pain for the Bulls.

Stay Tuned & Good Luck!

Until next time,


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No positions in stocks mentioned.

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