College Day Trader: Market gets into holiday mood

The markets took a breather last week and finished Friday off in modestly negative territory. Investors on Wall Street packed their travel bags early ahead of the three-day weekend as the market traded on relatively light volume.

The Nasdaq Composite continued its upward trend by tacking on 52 points for the week, to finish at 2,251, the S&P 500 gave back a modest 14 points to close at 1,277, while the Dow coughed up 296 points to wind up the week at 11,005.

"Be prepared for a continuation of negative commentary by companies as they warn about the second quarter," commented Luz Valdez, chief market strategist at Seattle Capital Group. "Everyone knows the second quarter is going to be miserable, but there's a some optimism on the part of investors that would hope that the commentary would be geared toward a better scenario," she added.

Trader Talk: Waiting for a continuation of the rally

This column has been adamant over the last seven weeks about using weakness in the markets as a buying opportunity. However, the price action demonstrated over the last week is sending mixed signals as to whether or not this market has enough legs to mount another rally to the upside.

Last week the market started Monday off very strong with all of the major indexes moving forward; however, the markets showed little follow through and appear to be moving into consolidation. While this is perfectly natural for a market attempting to stabilize after a phenomenal run, the best course of action is to wait for the market to start moving again before entering any trades.

Many stocks have moved up on hopes that the worst is over for the U.S. economy. If economic data comes in to suggest otherwise, the markets could be in trouble.

This week investors will have plenty to focus on with the beginning of the earnings' warning season about to kick off coupled with a lot of important economic data.

Reports due this week include indications about consumer confidence from the Conference Board will be released today, and the unemployment rate and the National Association of Purchasing Management (NAPM) will come out on Friday. As always, these indicators will help Wall Street gauge the probabilities of further Federal Reserve easing at its next meeting on June 26-27.

Stock of the week: PLCM (Polycom)

Polycom Inc. is walking up the ladder right now in a very bullish formation. The stock has rallied a very robust 200 percent off of its lows of $10 back in April to close at 29 on Friday. The stock is pulling back from some resistance after making a 30-day high last Monday. The company is solidly profitable as gross margins ticked up in its last quarter to 57.5 percent. Its balance sheet is solid with cash and an investment balance of $316.2 million, or almost $4 per share. This is a stock with a target of $40 a share in the next three months.

Being that this is the last issue of the year, I would like to thank everyone for the constructive feedback and support that I have received in developing the business section of The Daily. Those wishing to continue learning about the markets can visit www.collegedaytrader.com over the summer to get updates on the CDT portfolio. As always, good luck trading and never stop learning.