Snapshot Notes - April 29, 2008


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TUESDAY, APRIL 29, 2008

Most Are Waiting on Data, Fed

04/29/08 10:15 AM EST

As of:

SPX 1375

HELP ARCHIVE

Good Tuesday morning...We begin the day with mixed, choppy trading in the major indices and the broader sector groups as well. We once again have an odd grouping of leading/lagging sectors, which has been the case for most of the past three days. We don't usually see a trending move in the indices unless most of the underlying sectors are pointing in the same direction.

During the past week, we've discussed a few minor sticking points with the current rally. We've seen a couple of signs of too much optimism (from Rydex traders and individual investors in the AAII sentiment survey), and volume has been excessively low. I don't often put a lot of emphasis on market-wide volume unless it's unusually high (which tends to be bullish) or low (which tends to be bearish), and over the past couple of weeks we've been dealing with the latter.

Yesterday, we also went over an unusual reading among one of our intraday guides, which had reached an extremely overbought reading on the Nasdaq 100 despite the fact that that index hadn't reached a new multi-day high. Looking over other instances of such a situation over the past six years, we typically saw that index back off over the next couple of days.

So we have a few factors lining up (all of which I would consider minor) suggesting that the upside may be limited for a spell, but the news flow - particularly tomorrow - should trump whatever those indicators have been suggesting. We have a deluge of economic data Wednesday morning, then of course the FOMC decision in the early afternoon. The volatility following the announcement will likely wipe out whatever gains or losses are made by the indices over the past couple of days.

Market behavior on the day before a scheduled Fed announcement has been mixed. The indices typically do not make a move of more than 1% or so, but even that has not been terribly consistent. On the day of the announcement, we have usually seen a modest upward drift in the morning hours, then a flatline heading into the lunch hour, with volume that drops off a cliff. Once the announcement is made, we've usually seen two or three wild swings in either direction before a more directional trend heading into the close (which often gets reversed in the days following). All in all, it's a mixed picture and I'm not doing anything aggressive trading-wise until the assumed volatility on Wednesday is out of the way and I can define a better edge than what we've seen.

All the best,

Jason Goepfert

President and CEO

Sundial Capital Research, Inc.

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