Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets, visit futures-research.com for your free 2 week trial!
The market is likely to remain volatile over the near-term but commodity markets in general seemed to have turned the corner. Weakness in the energy sector will remain a concern for the market but it appears that a long and intense recession may have been avoided with the US and world stimulus to banks, credit issues and the monetary base. Economic data is likely to remain poor but commodity prices may have recently priced-in a major recession and overshot fair value. The weaker currency in Europe helped pressure London futures while the rollover to the downside in crude oil helped US sugar set-back from the highs yesterday. While spillover support from firmer equity markets and Wednesday’s Fed rate cut initially provided a lift to March sugar to start off higher yesterday, gains were cut short by a rebound in the Dollar, a slide in oil prices and more bearish economic news. Month end book squaring and portfolio adjustments was given as the primary reason for the Dollar’s comeback which diminished the appeal of physical commodities such as sugar. But we suspect the sugar market was also pull back by the US 3rd quarter GDP showing a 3.3% drop in consumer spending and certainly leaves the demand environment bearish. With still no word on whether the US will import more sugar, the market may lack a bullish catalyst unless the Dollar trades sharply lower. Tight global credit conditions are still a problem that is restraining trade as the market deals with the potential for defaults from smaller companies who bought ahead of the late September/early October break. Open interest continues to decline and it would be a positive sign to see some stability or even higher open interest ahead.
Stock Market Commentary – 2008.10.31
by Dave Hightower on October 31, 2008
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets, visit futures-research.com for your free 2 week trial!
The action in the stock market yesterday appeared to be an example of the market viewing the glass as half full, as prices made a lot out of little in the headlines. Certainly one can suggest that US currency market operations were a positive for the global economy and certainly the US numbers yesterday were not as weak as expected. However, there is a widespread feeling that the consumer continues to hold back spending aggressively in the face of the uncertainty and that in turn should make the Personal Spending reading this morning one of the more important readings of the week. With the market starting out on a slightly negative note this morning, we suspect that even a slightly disappointing reading will add to the downside tilt. In fact, we think that the market is seeing more than enough evidence of slowing to at least send stock prices back to the middle of the last month’s consolidation zone. At the highs yesterday, a number of stock measures were almost at an upside breakout point on the charts and while the US, Chinese and Japanese rate cuts are helpful, we are not sure that the easing moves will be able to head off the slowing that is already front loaded into the equation. The ECB’s Ordonez yesterday suggested that developed countries were entering a sharp slowdown, but yet the ECB can’t seem to step up to the plate and cut interest rates and that would seem to leave at least a portion of the global economy mired in a contractionary spiral.
DOW: Around the prior session’s highs, the Mini Dow was almost into an upside breakout and that is a very surprising development. The bulls would rationalize the relative level of the market at this week’s highs, by suggesting that the market overshot on the downside at this month’s lows and that seeing economic readings that are not as bad as expected, gives validity to the view that stocks at the October lows were undervalued. However, given that the markets can’t know how long or deep the slow down will be and certainly the markets don’t know if the financial contagion has been quarantined, we think that prices are currently too expensive. In fact, unless the US numbers this morning manage another “not as bad as expected” result this morning we would expect the Mini Dow to at least drift back down to the middle of the last month’s consolidation. Near term downside targeting is seen at 8,987 and then down at 8,873. In order to send the market below the aforementioned support levels, probably requires a fresh financial contagion issue or an extremely discouraging set of personal spending readings.
NASDAQ: It should be noted that the December Nasdaq did manage a new high for the move this week and that action somewhat erased the pattern of lower highs that was in place since the October 14th spike up rally. However, with the Bank of Japan overnight suggesting that (a harsh storm seen only once in 100 years is raging) we have to think that Nasdaq longs entering the market at current levels are assuming a very poor risk and reward setup. In fact, the December Nasdaq could slide down to 1272 without any damage to the charts. The fact, that the crisis is indeed showing up outside of the US and the fact that the US is starting to see a number of layoff announcements in every trading session, would seem to give the edge back to the bear camp. Initial support levels in the December Nasdaq are seen at 1294, 1272 and then again down at 1250.
S&P 500: Like the rest of the market, the S&P early this week was almost into an upside breakout on the charts! However, for the last two sessions, the market has seen a resumption of a lower high pattern and it would still seem like the path of least resistance in prices is pointing downward. As suggested before, the flow of scheduled US numbers this morning will be very critical and unless the market sees a better than expected Personal Spending reading, we doubt that the market will end the week on a positive note. In fact, initial downside targeting in the S&P is seen at 927.50 and then again down at 917.10.