IRIS Wealth Creation & Management

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Daily Market Summary & Analysis, AUG 26, 2010

The Asian market had some stability today. China up +0.25%, HongKong down -0.11%, Taiwan down -0.61%, Singapore down -0.02%, Japan up +0.69%, South Korea down -0.27%, Australia +0.83% and India up
+0.26%. Good news came from Japan as its government might consider currency intervention after the yen has risen 15% this year. Exporters stocks edged higher on speculation of Japan’s stimulus package and a weakened yen against the dollar in today trading session.   
 
In the US front …
At 8:30AM EST the Labor Department stated that Weekly jobless claims in the week ended AUG 21 fell 31,000 to 473,000, the first decline in one month.  This number is better than Wall Street economists’ expectation of 490,000 and better than last week data of  500,000 range.  The trend in jobless claims, however, sends a troubling message because the four-week average rose moderately, +3,250 to 486,750. Pimco CEO & CO-CIO, Mohamed El-Erian commented right after the number reported, he expected a downward revision of GDP and did not feel today Weekly jobless claim as encouraging. “Investors have to navigate to a new slow, muted growth environment as we are still in a jobless recovery”, he added. And DR Doom, Nouriel Roubini, CEO of Roubini Global Economics, is even more bearish. He sees there is a 40% chance that the economy will go into another recession.
 
Today data, indeed, was the only silver lining we have seen in weeks.  However, Wall Street participants remained skeptical of the oversold bounce. And as we reported yesterday, traders were looking to re-short at resistance, rather than going long.  The S&P retreated into negative territory in the last hour in light trading volume; the index closed at 1,047.22, down -0.77%. The DOW has slipped below the psychological level at 10,000 for the third day this week, closed at 9,985.81, down -0.74%. This is significant because the DOW has not closed below 10,000 level in seven weeks.
 
Clearly, the market seemed to be on the “sell-mode” as economic jitters continue.  Investors are also anxiously waiting for the FED Chairman, Ben S. Bernanke’s speech, the GDP report, and consumer sentiment tomorrow.  Most Wall Street participants expect a neutral reaction to the FED’s speech, but the GDP downward revision could be “very ugly”.  According to a survey by Bloomberg, economists expect a significant downward revision, from +2.4% to +1.4%, for the second-quarter economic growth. This is the main reason for today “sell-off” into the close. Support levels are 1025-1030, the July low at 1010, and the psychological level at 1,000. Resistance levels are 1050, the 1070-1080 range and of course, the 50d-MA at 1085.44.  We don’t see a strong technical bounce until there is capitulation with strong volume and prices.  It’s a dangerous environment to bet heavily on the long side when market participants mostly look to short into resistance. On that note, please take care.  
Best regards to all, and good luck in your trading. 
 
 
 
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