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Oh how far we’ve fallen… the Dow closed the week at 13,265. On Friday the advances were outnumbered by the declines by more than 2 to 1 on both the NASDAQ and the NYSE exchanges.

Despite some companies posting better than expected results, the dark clouds hovering over the real estate market and likewise the concern about possible sub-prime loans defaulting by the truck load kept the investors from hitting the buy button.

With such a dismal ending to a week I feel it’s best to cap my summary there and look forward to The Week Ahead, both literally and my upcoming blog topic that I expect to post sometime tomorrow.

On a side note: I have been contemplating a change in my website and I want some opinions from my regular readers. If you could, please take a moment and email me any thoughts you have on what you like and don’t like about my current layout, content, etc. I would greatly appreciate it. I am considering combining my Week in Review and my Week Ahead blog postings to make it easier to visit one time and get the recap as well as the upcoming events in the market. This would be a combined entry on either a Saturday or Sunday. It is my goal to then use the time during the week to highlight individual stocks that I feel are noteworthy as well as other interesting things going on in real estate or insurance related topics. Let me know what you think…

As always, I appreciate your feedback and comments…

Was it something I said?!

The markets were sent reeling yesterday as the Dow have back all that it had gained during the entire week and then some! The Dow finished the week at 13,851 after falling 149 points (1.07%) on Friday, well off Thursday’s record and lower than it started the week.

The other major indices followed suit… the NASDAQ was down 1.19% on Friday and the S&P 500 was down 1.22%.

Disappointing earnings were much to blame but perhaps there was some profit-taking in there, too. Everytime the market breaks a “pyschological barrier” as it did when the Dow broke 14,000 there are people out there who are locking in some profits… for instance, if someone had been investing in a mutual fund or Exchange Traded Fund (ETF) that tracks one of the market indices, if the investor had dumped a bunch of money in around 13,000 they would be happy to sell at the 14,000 level that it reached on Thursday. It would not have taken long to lock in these kind of returns either. If you purchased a fund that tracks the Dow on April 30th when the Dow closed at 13,062.91 you would have locked in a return of around 7% in just under 4 months. Do that kind of return in a quarter and if you’re able to do it a few quarters in a row and you’re on your way to a healthy 21-28% return for the year… but most investors can’t consistently do it every quarter. Hence, when we do see those profits, we like to lock them in.

Think I’m full of it? Think I’m crazy?! There’s actually a lot of research and studies that have been predicated on this notion that most people will lock in when the see profits and likewise will hold on to a stock too long when they’re losing money because they’re hoping to regain it. It’s the same pyschological factors at play in compulsive gamblers; they think they can win it back. Of course, compulsive gamblers don’t typically cash out when they’re up… I guess that’s the difference. A smart gambler will take some off the table, for instance the amount they started with, and just play with the winnings. Alas, I digress. I didn’t mean for this to become a poker or gambling discussion. My point being I could see where a lot of people used this past week as an opportunity to cash in a nice gain.

And a lot of people get caught up in their daily lives and don’t pay attention (at least not too closely) to the daily changes in their investments. With the Dow setting a record and that being news worthy, even the investors that normally don’t pay close attention to their investments would be thinking about them when they opened the morning newspaper on Friday or when they listened to the news on the radio or in the car. When a major index breaks a milestone, it gets media attention. In turn it gets more attention from the general public, and that can either send it screaming to even further heights as we saw in the Dot Com Era or it can bring it down like it did yesterday.

Here’s looking forward to The Week Ahead. As always, I welcome your comments and feedback…

After taking the past few days off I wanted to catch up and post my usual The Week In Review as well as look forward to The Week Ahead. A lot has happened since I last wrote so pardon me if I skip over some things and give you a very brief summary this week…

There wasn’t anything scary about Friday the 13th this past week unless you are a Bear in the market. The Dow broke its previous all-time high and even flirted with 14,000 this past week. During Friday’s trading the DJIA index rose to within 70 points of this next milestone only to pull back slightly and settle at 13,907 (a 2% gain on the week!)… other indices were moving significantly higher as well. The S&P 500 was up 1.4% to 1,552.50. The NASDAQ was up 1.5% in line with the S&P 500, ending the week at 2,707.

The week ended on an excellent note for the indices but early in the week appeared to be singing a different tune. On Tuesday, Home Depot and Sears reported lower than expected earnings. Home Depot blamed the sluggish housing market for the decline. I don’t entirely buy into Home Depot’s reasoning. I expect Lowes (NYSE: LOW) to post better numbers than the Home Depot did. Lowes reports its second quarter earnings on Monday, August 20th. Although I wouldn’t expect Lowes to completely sail past the analysts’ estimates of $0.61 per share quarterly earnings, I do think it will meet or slightly exceed them.

Considering the negative news coming from Home Depot earlier in the week, the market was much more upbeat Friday when General Electric posted better than expected quarterly earnings sending the stock to a five year high above $40 per share. The GE quarterly earnings even over-shadowed the 0.9% drop in retail sales that the US Department of Commerce reported on Friday for the month of June. This nearly 1% drop followed the May increase of 1.5%. I think the GE results were more of a surprise to investors than the slight drop in retail sales, so although these sound like conflicting results being reported, the GE results are for an entire quarter - not just the month of June like the Department of Commerce’s report, and furthermore the GE reported results were much more unexpected than a very slight decrease in the retail sales for the month of June.

Here’s looking to The Week Ahead!!!

As always, I appreciate your comments and feedback…

Whether you call it lucky or not is up to you, but the bulls had a good week. The Dow Jones Industrial Average, which started the week at 13,409, finished the week up just over 200 points (a 1.5% gain). The week was filled with mostly good news as investors were delighted in a lower than expected decline in factory orders as reported on Monday. Trading took a backseat to fireworks and cookouts on Wednesday for the 4th of July holiday in the U.S. Then, the week ended on another good note with the unemployment rate meeting the 4.5% expected rate and the nonfarm payrolls being surprisingly slightly higher.

While all of this is a little more cause for cheer rather than alarm, it does not signal any dramatic or unexpected changes. The markets were trading a much lighter volume as investors were much busier spending time attending family reunions to boast about their first half of the year investment results it seems.

Regardless what the unemployment rate does in the short term, it is nice to end the week with a positive comment… so I just wanted to note that the 4.5% unemployment rate is quite low and is an excellent sign that the economy is still doing quite well overall. There are several economic indicators being reported next week, in fact it seems like we have something coming out every day next week… some are more important than others as usual. For instance, retail sales data for the month of June will be released by the Department of Commerce on July 13th (considered to be an important economic indicator). Not as important… the treasury budget announced by the US Treasury Department on the 12th. We will revisit these items when we look at the week ahead.

Here’s looking forward to The Week Ahead… both literally and in the ongoing blog that will be updated later this weekend. Till then, enjoy your weekend! As always, I appreciate your comments and feedback…

Let’s recap what happened in the stock market last week:

Last week marked the end of the 1st half of 2007.
The Dow finished the second quarter of the year up 8.5%
The S&P 500 - up 5.8%
The NASDAQ - up 7.5%

Interesting to note, the Dow and the S&P 500 finished this past week roughly around the same place that they started the week (see the charts above that I copied from Yahoo! Finance)

About those economic indicators…

Housing, both existing home sales and new construction, continued to disappoint by posting lower than expected numbers.

Surprises… the market, i.e. investors, HATE surprises!!!

There was a bomb scare in London when authorities found a Mercedes Benz parked in a busy part of town (the articles that I read noted a lot of night clubs in the area) packed with explosives and nails… a reminder that terrorism has not been eliminated and even if it had been wiped out, there are still some crazy people out there.

Final thoughts on last week…

I think some hedge fund managers, mutual fund/pension/portfolio managers, and yes even some individual investors and day traders did some profit-taking this past week to lock-in (realize) gains that they made during the first two quarters of 2007. I had speculated that this might happen in my blog last week titled “The Week Ahead”.

Here’s to a successful second half of 2007, regardless what your investing strategy is… I hope your investments do well as we continue on this journey together. As always, I welcome your comments and feedback…