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.