IRIS Wealth Creation & Management

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Monthly Archives: August 2010

Daily Market Summary & Analysis, AUG 31, 2010

Concern about the US economy caused equities to fall across Asia in today trading session. China down -0.41%, HongKong down -0.97%, Taiwan down -1.61%, Singapore down -0.23%, Japan down -3.55%, South Korea down -1.23%, Australia down -1.1%, and India down -0.34%. Japanese stocks tanked hard as investors feared the government and Bank of Japan would be unable to stimulate the economy. July Japan industrial production data was better-than expected, +0.3% m/m. Retail sales was also greater-than-expected, +0.7% m/m. These data, however, failed to inspire any buying and the Japanese Nikke hit 16-months low today.
 
In the US front…
The S&P Case-Shiller report show US national home price index rose up +4.2% y/y in Q2-2010. This is better than expected of 3.9%. Analysts David Blitzer from Standard & Poors’s, however, is not too optimistic, “this is just a calm before the storm,” he commented right after the data was released. August Chicago PMI 56.7 vs 62.3 in July; the data was weaker than expectation of 57.6. There is a silver lining in AUG consumer confidence, the index rose to 53.5 versus 50.5 expected. Lastly, today the FED minutes has indicated that they would consider more stimulus if necessary.
 
US equities suffered a big drop of -4.81% in August, the worst in nine years since 2001. Market participants are still confused as to where this market will be heading. Brent Wilsey, president of Wilsey Asset Management, is on a buy side as he feels investors are too pessimistic. “We are in far a better shape than March 2009,” he explained. Peter Costa, president of Empire Execution and CNBC market analyst sees a highly volatile market coming forward as fund managers shuffle their portfolios in September and October. Some market participants expect a high volatility of 30-40 range for the coming months, this is much higher than August volatility of 20 range.
 
Bob Phillips, managing partner of Spectrum Management Group remains bullish, citing the market will rally by the end of the year. “The positive catalysts for stocks will be corporate earnings, third quarter earning season, undervalued PE for the S&P, free cash flow, and political cycle”, he explained. Don Wordell, portfolio manager at RidegeWorth mid-cap value equity fund, stated that his fund has been buying stocks with strong fundamentals in the recent pullback. He sees a long term appreciation for US equities, given the time-line of 12 to 24 months.
  
The S&P 500 had a very choppy session today; the index closed at 1049.33, up +0.04%. Technically, the 1040 remains very critical for the S&P. If that breaks, it’s very likely the index will retest the July low of 1010. We continue to be cautious. A short-term bounce is still possible with the target of 1060-1065 for the S&P. However, we strongly believe that stocks might not be bottoming until the 900s range for the S&P. Traders continue to short into resistance and take profit very quickly. It’s unlikely there is any sustainable rally until we see capitulation in prices and volume.
Best regards to all, and good luck in your trading.

Daily Market Summary & Analysis, AUG 30, 2010

Today the Asian market rallied across the board. China up +1.79%, HongKong up +0.68%, Taiwan up +0.24%, Singapore up +0.62%, Japan up +1.76%, South Korea up +1.82%, Australia up +1.89%, and India up +0.19%. Japan government and the central bank had an emergence policy meeting at 9PM on Monday for two purposes, currency intervention and plans for a new economic stimulus package worth 920 billion yen. The yen was weakened after this news; however, it gained some strength on speculation that the action taken by the government and Bank of Japan would not be sufficient for economic recovery.

The US  market faces great challenge in today session. At 8:30AM EST, the Commerce Department reported Monday that July personal income and consumer spending was up 0.2% and 0.4%, respectively. Wall Street analysts were expecting an increase of 0.3% for both income and spending.The savings rate fell to 5.9% from 6.2% in June. The S&P500 retreated into negative territory right after open, giving up much of all Friday bounce; the index closed right at the low of the day at 1,048.89, down -1.47%. The sell-off also sent the DOW and the Nasdaq to close at session lows to 10,009.73 (-1.39%) and 2,119.97(-1.56%), respectively. All the major indexes closed down six times out of eight sessions.

The selling is due to extreme weakness in the financials, a depressed housing market, and a strong bearish sentiment in the market, Sam Stovall, chief investment strategist at Standard & Poor’s Equity Research explained. John Lynch, chief equity strategist at Wells Fargo feels that today trading volume is light and that investors need to be patient. ”There is an 800-pound gorilla, the big job report on Friday. M&A activities and shares repurchase program will be very positive for stocks,” he added. David Lutz, managing director at Stifel Nicolaus is moderately bullish, citing “market is putting in a floor. And the financials would see a relief rally on good housing data”. Peter Cecchini, chief strategist& head of Special Situations at BGC Partners, however, is not too optimistic. He feels that we are still in a “trader-market” and he remains skeptical for two reasons: there is no real income growth and disposable income is down for the first time since JAN-2010.

1040s range remains a critical support for the S&P500. 1025 and the July low at 1010 are the next support levels. Resistance are 1068 and the 50d-MA at 1083.03. The market looked heavy at the moment with the H&S top pattern, leading to more short selling. Even though a technical bounce is still possible, market participants are still looking to re-short the resistance instead of going long.

Best regards to all, and good luck in your trading.