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Fears of softening domestic growth in China and the lack of a positive reaction to the FOMC meeting in the US leaves international stock markets under some pressure overnight. Shanghai stocks were up slightly but Hong Kong was down. The market seemed to “need” good reasons to see a continued uptrend above 3 1/2 month highs but economic data remains sluggish and traders see a slower growth pace out of China as a concern. Tuesday morning’s flow of U.S. economic data did little to relieve the negative tone. In fact, U.S. 2nd quarter productivity showed the first decline in six quarters to post results that were below expectations. Both June Wholesale Inventories and Sales figures came in below expectations and served to add to the already fragile sentiment. The post FOMC meeting comments made note of the recent slowdown in economic data, and that the Fed would use proceeds from maturing mortgage securities to purchase longer term treasuries in an effort to support the economy. While stocks saw a rally on the decision, the market failed to move higher. Many traders see quantitative easing as “pushing on a string” as weak demand for credit has helped keep economic numbers sloppy even with low interest rates and plenty of liquidity. Perhaps news that the House passed the $26 billion state bail-out package helped to add to the bearish tone for the market as funding is coming from increased taxes on multinational companies. US Trade data will be monitored today.
S&P 500: The market spent part of seven trading sessions in a fairly tight consolidation and a surge higher in the US dollar and sluggish growth news from China are seen as negative forces and the market failed to find good reasons to attract new investors. Look for selling resistance today at 1108.50 and 1111.40 for September S&P with 1088.80 and 1082.40 as downside objectives.
DOW: Moving below yesterday’s lows in overnight action could show the sensitivity of the market to the global economic tone. September e-mini Dow futures even took out Friday’s lows overnight. The technical action looks weak and the market looks vulnerable to give back a portion of the solid gains seen since the July lows. Selling resistance for the September e-mini Dow is at 10,550 with 10,403 and 10,315 as next support.
NASDAQ: There were a number of company downgrades from major Wall Street banks, with the most notable a downgraded of Intel’s 2010 growth outlook, and that seemed one of the catalysts that weighed on the tech sector. A build up in PC components at various Asian locations was also seen as a concern and Advanced Micro Devices was also cut from “overweight” to “equal weight” from another bank. Failure to move over Monday’s highs and penetration of the July-August uptrend channel turns the technical picture bearish for September NASDAQ. The market should encounter stiff resistance near 1880.00 today with 1833.60 as downside target.
TODAY’S MARKET IDEAS: The market needed reasons to attract new buyers but economic news is turning a bit more negative and some long liquidation selling appears likely over the short-term. The market may face a period of uncertainty regarding policy, taxes and employment and uncertainty normally sparks selling.
Stock Index Commentary – 2010.08.11
by Dave Hightower on August 11, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
Fears of softening domestic growth in China and the lack of a positive reaction to the FOMC meeting in the US leaves international stock markets under some pressure overnight. Shanghai stocks were up slightly but Hong Kong was down. The market seemed to “need” good reasons to see a continued uptrend above 3 1/2 month highs but economic data remains sluggish and traders see a slower growth pace out of China as a concern. Tuesday morning’s flow of U.S. economic data did little to relieve the negative tone. In fact, U.S. 2nd quarter productivity showed the first decline in six quarters to post results that were below expectations. Both June Wholesale Inventories and Sales figures came in below expectations and served to add to the already fragile sentiment. The post FOMC meeting comments made note of the recent slowdown in economic data, and that the Fed would use proceeds from maturing mortgage securities to purchase longer term treasuries in an effort to support the economy. While stocks saw a rally on the decision, the market failed to move higher. Many traders see quantitative easing as “pushing on a string” as weak demand for credit has helped keep economic numbers sloppy even with low interest rates and plenty of liquidity. Perhaps news that the House passed the $26 billion state bail-out package helped to add to the bearish tone for the market as funding is coming from increased taxes on multinational companies. US Trade data will be monitored today.
S&P 500: The market spent part of seven trading sessions in a fairly tight consolidation and a surge higher in the US dollar and sluggish growth news from China are seen as negative forces and the market failed to find good reasons to attract new investors. Look for selling resistance today at 1108.50 and 1111.40 for September S&P with 1088.80 and 1082.40 as downside objectives.
DOW: Moving below yesterday’s lows in overnight action could show the sensitivity of the market to the global economic tone. September e-mini Dow futures even took out Friday’s lows overnight. The technical action looks weak and the market looks vulnerable to give back a portion of the solid gains seen since the July lows. Selling resistance for the September e-mini Dow is at 10,550 with 10,403 and 10,315 as next support.
NASDAQ: There were a number of company downgrades from major Wall Street banks, with the most notable a downgraded of Intel’s 2010 growth outlook, and that seemed one of the catalysts that weighed on the tech sector. A build up in PC components at various Asian locations was also seen as a concern and Advanced Micro Devices was also cut from “overweight” to “equal weight” from another bank. Failure to move over Monday’s highs and penetration of the July-August uptrend channel turns the technical picture bearish for September NASDAQ. The market should encounter stiff resistance near 1880.00 today with 1833.60 as downside target.
TODAY’S MARKET IDEAS: The market needed reasons to attract new buyers but economic news is turning a bit more negative and some long liquidation selling appears likely over the short-term. The market may face a period of uncertainty regarding policy, taxes and employment and uncertainty normally sparks selling.
Tags: DOW, Financials, NASDAQ, S&P 500, Stocks
About Dave Hightower