Sideways Is Bears' Best Bet

There wasn't much to complain about Monday, but still a lot of information (and perhaps nachos and wings) to digest.

Indeed, the markets spent Monday chewing over last week's helpings of confirmation signals. The six-month-long rally was "confirmed" by the Dow Jones Transportation Average hitting a new all-time high, as did the Russell 2000, S&P 400 Mid-Cap index, the NYSE Composite and the NYSE advance-decline line (or the ratio of stocks gaining vs. those losing ground).

Likewise, the Federal Reserve stepped out of the way of the markets, acknowledging the economy's soft landing and foreshadowing no interest rate adjustments for a good while. The bulk of earnings season is behind us, and profits so far point to yet another quarter of double-digit growth.

"If you can't make hay with these numbers, what are you going to do when you don't have earnings or a Fed meeting helping you out?" says Marc Pado, chief market analyst at Cantor Fitzgerald.

The three major averages were essentially flat on the day. The Dow Jones Industrial Average was the only index to gain, closing up a fraction at 12,661.74. The S&P 500 closed down 0.1% to 1446.99, and the Nasdaq Composite finished down 0.2% to 2470.60. The Transports closed down off of Friday's record high -- falling 0.9% to 4962.93.

The surface looked dull, but there was strength in a previously lagging group -- the semiconductors, in part due to Barron's interview with Michael Cahill, manager of Chilton Investment. Semiconductors have struggled this year as many tech companies warned about future earnings weakness in 2007.