Simplespread

Our new Fed chief got in trouble recently by saying that future interest rate policy would be "data dependent." Well, we would ask, how else should any policy or decision ever be made? This brings to mind John Maynard Keynes' famous answer to someone who questioned him about why it appeared his opinions changed from time to time. He replied, "When the facts change, I change my mind. What do you do, sir?"
Are Simplespreaders data dependent too?
Technical Analysis of the stock market, or "Visual Analysis." in John Murphy's terms, is data dependent. Fundamental Analysis is not. The former depends upon indicators of supply and demand for stocks; the latter depends upon someone's subjective judgment of extremely questionable opinions based on even more questionable data. And we all know what opinions are, don't we?
A recently published work, "The Secrets of Economic Indicators: Hidden Clues to Future Economic Trends and Investment Opportunities" by Bernard Baumohl, sums up the predicament we find ourselves in today. Quoting from my published Amazon book review, I said, As you leaf your way through the compilations, you come to realize that the "numbers" that move the markets are frequently incomplete. The queried respondents upon whose businesses and operations are being used to create data are notoriously negligent in meeting reporting deadlines which brings up the question of whether we ever get a full reading of what's being reported. Thus the need for "restating" next time around. But by "the next time," those numbers are irreverent and relegated to history. Question: So, was that big market move last month based on bad info, and if so, will it correct itself when the old data is corrected? Not likely, because a new set of questionable data just got reported and is now at center stage. Deja vu all over again. (You can read my full review here)
Insight gleaned from Mr. Baumohl's book fully supported my long-held view that "the numbers" are questionable at best, and terribly misleading at worst. From my years of trading on the floors of two exchanges, I know there only two things that move stocks: the buyers and the sellers. When the "big" money people wanted in or out, nobody got in their way because it was their actions that moved the markets. Their reasons were secondary to their actions. If institution X wanted to sell 500,000 shares of Wendy's, everybody knew the stock was going to drop down until the brokers found enough buyers to take the stock off the seller's hands.
Alex Berenson, with a strong pat on the back from Mark Cuban, has written a penetrating expose of the late 90s' game of earnings manipulation called "The Number." And yesterday, here in Houston, we learned what happens to chief executives who played the game too well. It was called Enron.
So, the Fed and the Fundamentalists can be "Data Dependent" all they want. They can collect endless reams of statistics that point either north or south...or both. But their data is flawed, incomplete, massaged, manipulated. Anyone can take their numbers and make a bullish case or a bearish case. In a word, their data is questionable, and not worthy of policy or investment decisions.
On the other hand, Simplespreaders use data that is real and live. We know whether a stock is in an uptrend or not because we can see it. We know whether a stock is retreating back to support or not because we can see it. We know whether a stock is strong or not because we can compare its price performance against all other stocks. And because we invest real money into real stocks, we need real data.
So, yes, Simplespreaders are also data dependent. The only difference between the other data-dependent people and us is that our data is reliable. Theirs is not. If you don't believe me, go ask the Enron boys.

Monday and Wednesday Key Reversal Days built the bottom for this episode. NASDAQ has a lot more overhead resistance than does the Dow, so we'll just have to watch how this plays out over the next week. Foreign entities got hit hardest over the past few weeks and have the most room to do a "snap back."
Metals & Mining retains top spot but took a 20% pasting from recent all-time highs and now must try to mount a rally back. Taking a quick look at the table below, we see that if we remove this sector, the market hasn't had much to crow about over the past 6 months. Guess we should be happy for whatever strength we've had in any stocks considering the quality of the leadership - metals, raw materials, energy.
Manufacturing maintains its hold on 2nd place and probably is healthier looking than any other sector. Aerospace/Defense moved up into 3rd place which is the highest position it's had since back in August. This sector swings around a lot and doesn't hold onto strength or weakness. Automotive dropped to 4th, but continues to put in its best showing since the end of 2003. Transportation holds steady in 5th place, although it is showing some signs of weakening. Energy improved to 6th place, but the recent selloff was the biggest jolt this long-leading sector has had since 9/11. Chemicals continued its steady climb into 7th place. Nine months ago, this sector sat at the bottom of the list. Consumer Durables held onto the number 8 spot. Food & Beverage jumped into 9th place on the virtue of its bear market safety reputation. One month ago, it was 2 places from the bottom. Rounding out the Top Ten is another bear market favorite - Tobacco.
But let's get real here. Without High Tech, Retail, or Health Care as market leaders, what can the market do? Leadership that's healthy for our economy is not found miners and oilers. Until we get some real leadership, the market can look forward to more dreary days ahead, albeit with respites of short covering and bear market rallies.

Sector	26Novt05 to 26May06	Week of 26May 06	Visual Chartist Commentary
Metals & Mining	+32.0%	+3.09%	A superior bounce-back week kept the metals in first place. The precious metals are still having their troubles vis-a-vis the underlying hard stuff - real gold and silver. That has, in the past, spelled trouble. Confirmation of trends, and all that stuff. While most gold stocks fell through supports this week, the actual price of gold held a good 20% above its corresponding support area. Not particularly healthy internals. The gold stocks need to catch a bid and keep it.
Manufacturing	+16.4%	+1.06%	Most industries held at support levels. Still looking good at the right prices.
Aerospace/Defense	+14.1%	-1.52%	Not a good week. Plus some key stocks appear to have violated supports. Not much of anything of interest here.
Automotive	+12.44%	+1.34	GM did the unthinkable: it bottomed nicely, rallied, then retreated back to support before taking off on a 15% jaunt this week. Should we have noticed this pattern previously? Our thinking got clouded by the bad news coming in from all sides about the car business and credit ratings. Memo to brain: Shut ears; open eyes.
Transportation	+12.2%	+0.90%	The Airlines look okay. Air Freight looks good. Trucking and Shipping look bad. Railroads, for the first time in a few years, don't look that great.
Energy	+10.4%	+1.98%	Most areas still look okay. Individual stocks have standouts, but the broader areas are beginning to look a little toppy as weaker issues are beginning to roll over. Requires constant monitoring.
Chemicals	+8.0%	-0.08%	The sector still has upside momentum, but so few stocks have enough volatility to warrant looking for Simplespreads that your time is probably better spent elsewhere.
Consumer Durables	+7.5%	+0.72%	Most areas broke supports on this recent selloff. Can't get very excited about what is available.
Food & Beverage	+7.5%	+0.31%	Sugar, milk, and meat don't look that good. Everything else is doing their thing as a good bear market hedge. Poor volatility.
Tobacco	+7.4%	+1.66%	Everything except big MO beginning to put in place the right patterns for more bear market strength.
AND THE REST...
Media	+7.0%	+0.65%	Besides Magazines and Radio, things are looking up. Maybe the dry spell is over for this sector.
Banking	+6.9%	+0.07%	Not worth the time.
Conglomerates	+6.7%	-0.03%	Also not worth the time.
Leisure	+6.1%	-1.30%	The Gaming areas got hit hard, knocking the sector out of the Top Ten. Without that, not much going on here.
Telecommunications	+6.1%	+0.09%	Selectively, there is good looking strength here. Should keep eyes on it if it rises into Top Ten.
Electronics	+5.7%	-1.67%	Failing at a previous (2003) highs is not the way to remain a strong sector. Definitely disappointing. Recent action means they deserve to join their buddies, Computer Hardware and Software, at the bottom of the pile. But that doesn't leave much around to lead a rally in the market. And that's not very good news.
Utilities	+5.6%	+1.41%	Water Utilities got hit hardest - since March, down 16%. The rest of the group is marking time, gaining position on the rest of the sectors that got slaughtered. Not much of interest here.
Consumer Non-Durables	+4.8%	+0.89%	The way the shoe makers are acting, we're all going barefooted for the rest of our lives. Cleaning Products and Personal Products only bright lights here. The sector continues to disappoint.
Real Estate	+4.5%	+1.59%	If you close your ears and just look at the charts...the sector still stinks.
Drugs	+3.8%	+1.44%	Another disappointing sector. Biotech, the only bright spot over the past few years is weakening, and still way above any hope for support.
Financial Services	+3.4%	+0.78%	Strength last summer translated into leadership from the October bottom. The Brokers have sold off hard, and now have overhead resistance above them. Doesn't look good.
Dow Jones Ind. Avg.	+3.3%	+1.21%	Held at 11,000 as expected. Now big the bounce? And can the soldiers get their behinds in gear to catch up with the generals?
Materials & Construction	+2.9%	+0.18%	We can close the book on the Residential Construction folks. They're done. But it was a nice run - almost 700% from early 2000 to summer 2005. If you missed it, you missed one of the true gifts of recent stock market history. Now the question is can related industries hold up in the face of declining building activity.
Insurance	+2.2%	-0.21%	Life Insurance showing a little strength. The rest of the sector is dead.
Diversified Services	+2.0%	+0.14%	Some industries don't look that bad. It's just that they can't get a rally going.
Wholesale	+1.9%	+1.09%	Not much here.
Computer Hardware	+1.9%	-0.55%	Their topping patterns earlier in the year looked ominous. And so they were. What's wrong with Hi Tech? The patterns just aren't there.
Computer Software & Svcs	+1.1%	+0.24%	Marking time right along with Hardware.
Specialty Retail	+0.5%	-1.83%	Nada. Zip. Zero. Nothing.
Retail	-0.3%	-0.94%	A few big retailers are doing okay, but the rest of the crowd is dead in the water. Maybe the oft-predicted demise of the consumer has finally come to pass.
Health Services	-6.0%	+0.05%	Oh how the mighty have fallen. We're keeping our eyes on any sign of a resurgence, but nothing in sight yet.
Internet	-11.0%	+3.88%	Nothing can fly higher, or crash faster. It was a good week. But plenty of overhead resistance exists above. Worth keeping an eye on.