The Kirk Report

Range Bound Tape

From the start of the trading day until the close, the bears had firm control over stocks. But, just as they moved higher on low volume, they also fell on low volume. That's obviously the problem. Until the big boys and girls on Wall Street put real money to work or take their money out in a significant way, we're range bound for now. The faster we get use to this, the better off we will be.

Tomorrow we will have a number of things to trade on including the consumer price index, Michigan consumer sentiment index, business inventories and the N.Y. Empire manufacturing index. We'll also hear from companies like Circuit City (CC), Lehman (LEH) and Pier One (PIR). The Nasdaq managed to close a little above its 200-day simple moving average so tomorrow will be a fairly important day both in terms of fundamentals and technicals. Rest up and I'll see you back here bright and early.

What Has to Go Right

Jim Jubak's article is a worthwhile read. He believes the market could end the year as much as 10% higher if a number of things go right in the coming months. Some of those include strong actions by the Fed later this month, strong earnings performance by technology firms in the second half of the year, the consumer stays strong despite higher rates, and the price of oil stays low. READ

Should We Listen to the Fed?

Bill Fleckenstein and I share the same opinion - that despite fear and chatter to the contrary, there will not be any pre-emptive aggressiveness on the part of Fed. This is true for a variety of reasons, the most important of which is that the economy is not as strong as most currently believe. READ

A Tough Monday

The market is not acting well, especially considering that we've been seeing a bullish tilt on the first day of the trading week. In fact, even the Stock Trader's Alamanc points out that the Monday before triple-witching Firday the Dow has been up 8 of the last 12 years. Nevertheless, one saving grace for the bulls is that trading volume remains quite low, showing that conviction for the upside and downside remains muted, at least for now.

Cott

Some of you would be absolutely bored with some of the stocks I own in my retirement accounts. One such stock is Cott (COT), a Canadian generic soda pop maker. I found this stock some time ago through the Peter Lynch strategy of buying what you know. To save some money, I've been buying the firm's soda products at my local Wal-mart (WMT). For example, their Dr. Thunder drink - a knockoff of Dr. Pepper - which sells for 50 cents per 2 liter is a personal favorite. Late last week the firm announced plans to build yet another manufacturing facility in the U.S., a sign that business is improving. This is not a big surprise as the Cott reported that Q1 sales rose 26% to nearly $371 million, while EPS jumped 40%. The technical trend is also slow, but steady, one of the key ingredients for long-term positions. Take a look:

How Important is June 30th?

Almost every financial commentator I've read in the past month has made some comment on how important June 30th will be for the stock market. On that date we have the next meeting by the Federal Reserve and the deadline for the turnover of power by the United States to the new government of Iraq. We also have the end of the second quarter and 4th of July holiday soon thereafter. That's a lot of crosscurrents in play.

Market pundits like to look for notable catalysts and many see June 30th as that catalyst. Perhaps, but it has been my view that the market tends to react ahead of any significant date or event like June 30th. I base this view primarily from watching the market over the past decade. Anytime where we had a big date ahead, the market tended to make its move ahead of that point. The most recent notable example of this behavior was in March 2003 when the market rallied ahead of the Iraq invasion. Many people thought at the time that it would rally only after the war was won, but the market jumped the gun, as it tends to frequently do.

I point this out because I'm hearing that a lot of investors are waiting until after the June 30th deadline to invest or to sell their stocks. That may not be a prudent strategy, as the market tends to make its move, in one way or the other, ahead of any focus date. This is just something to consider as that deadline approaches.

In addition, I'm also of the opinion that June 30th isn't as important as some commentators currently believe. After all, the FOMC meeting is already well anticipated by the market. We all know that interest rates are going up, it is only a matter of frequency and size. The market has had a lot of time to discount any possibility and chances are very good any question regarding frequency and size will remain even after the FOMC meets. As for Iraq, not much really changes with the symbolic handoff. It is not like the U.S. military is going to pack up their bags and leave come July 1st. If anything, the danger increases AFTER that deadline since terrorists will become even more motivated to unseat the current government with their own agenda. And, beyond that, we will still have the Summer Olympics and the presidential race to be concerned about.

Evolving Systems

Momentum investors are chasing Evolving Systems (EVOL) this morning after its NumeriTrack product was selected by a "major U.S. telecommunications carrier" as the platform for its VoIP initiative. Clearly, the technicals are also working in EVOL's favor as with this move its nasty downtrend has been broken.

Watching the Supply vs. Demand

As many of my readers already know, I believe supply vs. demand is the #1 trump card for the stock market. When demand is higher than supply, stocks go up and vice versa. While I said in my first post this morning that inflows are improving and that sidelined cash is also increasing, the market still continues to be hit with a large amount of overhead supply. For example, new issue supply (IPOs and secondaries) continue to hurt the market. Last week we saw 8 transactions raising $3.1 billion last week with 18 new deals expected to raise $2.3 billion this week. When inflows are coming in a $1.4 billion rate, you can see why stocks are stuck in the mud.

How Strong is the American Consumer?

We all know that how the economy performs is directly tied to the strength of the U.S. consumer. In recent years, the consumer has remained very strong as a number of tax cuts and low interest rates have fueled a consumer spending boom. Nevertheless, as interest rates increase, refinancings decline, and additional government stimulus is taken away, it leaves a question mark regarding how the U.S. consumer will remain strong in both the near-term and long-term. This is especially true now since the average consumer holds more debt than at any other time in modern history. READ

A Honest Look at the Jobs Market

Recent government reports and surveys of employers suggest that the job market is improving. However, it is my view based on what I'm reading that the quality of jobs available in terms of pay and requirement of skills, isn't on the same upward trend. This is significant for the economy since we have a large number of people looking for high-quality jobs who still can't find them.

While politicians don't especially care that the jobs now being created are of the low-paying variety, we all should. As this article in my hometown newspaper suggests, even the teenagers looking for summer work at low paying/low-skilled jobs are having a fair amount of difficulty finding open positions since older workers who are generally overqualified have been taking their jobs instead. READ