IRIS Wealth Creation & Management

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Monthly Archives: September 2010

Daily Market Summary & Analysis, SEPT 30, 2010

At 8:30AM EST the Department of Labor released an encouraging jobs data
on Thursday. Initial jobless claims for the week ending September 25 were down
 -16,000 to 453,000. Four-weeks average are down -6,250 to 458,000. Another 
macroeconomic data came from the U.S. Bureau of Economic Analysis. Gross
domestic product growth or GDP for Q2 was resided up to +1.7%; this is higher
than prior estimate of +1.6%. 

 
September had +9% gain so far and it’s on track for the best month since 1939. Today trading session was fascinating to say the least. With encouraging macroeconomic data, stocks were rallying out of the gate. The S&P broke out above 1150 to new 4 months high at 1,157.01 in the first hour of trading. However, sellers were stepping in, sending the index down -0.31% to 1,141.15 by the closing bell. The DOW hit new high to 10,948.88 but tanked -0.44% to 10,787.75. In a similar fashion, Nasdaq went to the high of 2,400.06 but also closed in red, down -0.33% to 2,368.62. It’s important to note there was a major “reversal of fortune” today, the DOW made a 200+ points swing with heavy profit taking in the morning session and throughout the day. 

Besides profit taking, market participants believed the sell-off was also due to Moody’s downgrade of Spanish debt. In addition to this bearish news from Europe, the Central Bank of Ireland stated that Anglo Irish Bank would need 34.3 billions from government bail out. Iris Finance Minister Brian Lenihan said on Thursday “the country had no choice but to rescue the troubling financial sector which needs as much as 50 billion euro or $68 billion”. Shares of Allied Irish Bank Plc. (AIB) tanked after the news that the firm needs to raise 3.0 billion euro by the end of the year; stocks down -14.02% to $1.41.

Separately in Wall Street, celebrity banking analyst Meredith Whitney continued to sing her “usual bearish tune” for the U.S. and U.S. equities, citing states’ fiscal problems raised a systemic risk. Bill Gross, the bond king at Pimco also stated a negative view for the U.S. equities coming forward. Brian Belski, chief investment strategist at Oppenheimer Holdings Inc. disagreed with both Whitney and Gross. “There is a potential for a bond bubble and investors are under-invest in U.S. stocks. The firm issued a bullish calls for the market well into 2011 with target of 1300 for the S&P 500,” said Belski. 

Technically, we will conclude this market might need to consolidate as the S&P 500 had the best September in 71 years. Supports for the index now are 1130, the 200d-MA at 1118, and the psychological level at 1100. Resistance now are 1150, 1160, and May high at 1170 range. Unless the market can take out the 1150 level with strong volume and institutional participation, traders will continue to short into this strong resistance or stay at sideline. Earning season coming up in October and midterm election in November could act as a positive catalyst for the equities market in Q4-2010.

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

Disclosure: No positions in stocks mentioned at time of writing.

Daily Market Summary & Analysis, SEPT 29, 2010

Wall Street closed in red today due to bad news from banks. Major negative headline came from Bank of America Merrill Lynch as the firm said it will be laying off 20 to 30 proprietary traders. As we all know by now, institutional trading volumes have been light all through the year 2010. Analysts from major Wall Street firms have cut estimates for banks, due to the fact that proprietary trading no longer a hugely profitable business for giant banks. Meredith Whitney, a prominent banking analyst at Meredith Whitney Advisory Group predicted as many as 80,000 Wall Street professionals will be lay off in 2011.

Adding to the sour note, JPMorgan Chase & Co. is also closing down its proprietary trading unit, elimination about 80 jobs. Pimco “bond king”, Bill Gross once again stated his firm’s bearish view for the U.S. equities market, predicting a single digit returns for 2011. In addition to that he also warned the market about the social and financial issues as the baby boomers would barely have enough money to retire. The “doom & gloom” from the financial sector and negative comments from the “bond king” dragged the entire market down as selling accelerated by the closing bell. The DOW closed at 10,835.26, down -0.21%, Nasdaq down -0.13% to 2,376.56, and the S&P 500 down -0.26% to 1,144.73.

Technically, this market needs to consolidate the historic biggest gain for the September month since 1939. As we stated in yesterday report, the 1150 level is very critical to both the bulls and the bears. Market participants will continue to short into this resistance if the market does not have institutional buying to support the upward move. The S&P has failed three times today and selling accelerated at 3PM as the index could not move above 1150. Traders will be watching this level closely. And with all the “doom & gloom” news from Wall Street, the 1150 mark will remain a very strong resistance going forward. Supports for the S&P 500 index now are 1130, 1118, and 1100. Resistance are 1150, 1160 and 1170.

Best regards to all, and good luck in your trading. 
Disclosure: No positions in stocked mentioned of time of writing.