Snapshot Notes - September 1, 2006

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FRIDAY, SEPTEMBER 1, 2006

PostCloseSummary

09/01/06 5:00 PM EST

This morning I noted that we had a couple of competing stats for the day's trading - the bearish gap up opening from the payroll report, and the bullish seasonality that accompanies most pre-holiday trading.

The logical extension from the studies was to expect a close greater than yesterday's, but below the day's open, particularly in QQQQ. I thought that was too logical to work as advertised, but basically that's what we ended up with.

We knew entering this week that it would be filled with narrow-range, low liquidity days, which makes it more difficult to rely on any historical comparisons. Even knowing that, it was kind of a screwy week and I for one am happy to see it fall by the wayside.

Going into next week, there isn't much to note seasonality-wise, other than the well-known adages about September being the worst month of the bunch (check out the Seasonality section of the site for more detailed info). The week after Labor Day doesn't have any particularly consistent bias, though it does have a very modest negative return - nothing to write home about, though.

This weekend I will be posting a more in-depth look at each of our broad indicator categories, so hopefully we can garner something from that. The past month has been filled with go-nowhere studies on my end, as the stuff I've looked at with a more intermediate-term time frame have come out mixed in almost every case. A wide, extended trading range is usually the result when that happens, so now that we're approaching the upper end of the range it makes sense to expect some shorter-term confusion.

Have a very safe and relaxing extended weekend and we'll see you here next week!

ApproachingTheBell

09/01/06 3:25 PM EST

The trading days immediately prior to Labor Day and New Years tend to be the two lowest-volume days of the year, and barring a late spurt, we're on track to be in line with that today.

There's really nothing to say here that hasn't already been said - the drift this afternoon hasn't changed the technical picture or our intraday guides to any major extent.

LunchtimeLull

09/01/06 12:25 PM EST

With the move off the lows this morning, our short-term indicators have become more stretched, particularly the cumulative TICKS. Our measure for the Nasdaq is now about as overbought as it has become at any other time this year, and it's just not often a good idea to expect higher prices to be sustained when we see these kinds of readings.

That's been my mantra pretty much all week, with the attached disclaimer that those trying to anticipate a short trade should beware the thin trading conditions and positive seasonality heading into a holiday weekend. Those potential positives will be gone next week, however, and I continue to feel that those trying the long side should keep it very short-term.

MidMorningOutlook

09/01/06 10:25 AM EST

Good Friday morning...We welcome September with a largish gap-up open in the major indices before nearly everyone heads out for an extended weekend.

It should be no surprise to any of us (since I've gone over it several times before) that it has usually not paid to chase these kinds of opens. In the history of the Nasdaq 100 trust (QQQQ), whenever it has gapped up more than 0.5% on the morning of a payroll report, it closed higher than the open 7 out of 20 times, and the close was 0.3% lower than the open on average. Over the past two years, that has become even more extreme, with only 2 out of 10 closing higher than the open.

But today we are facing the very consistent positive seasonality seen on the day before the Labor Day holiday, which has closed in positive territory nearly 80% of the time. The logical conclusion for today, then, would be to expect a close that's lower than today's open, but still higher than yesterday's close...but things rarely work out so logically.

I've been leaning towards the idea that if we saw an upside breakout yesterday or today during these thin trading conditions and historically positive seasonality, that it would be given back shortly, and I still feel that way. The immediate selling of today's gap isn't really a surprise and doesn't change my outlook one way or the other.

All the best,

Jason Goepfert

President and CEO

Sundial Capital Research, Inc.

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