Stock Investing Recap For Week Of August 30 2010 From A Technical Analyst |
||||
| By: Lance Jepsen | ||||
Not even merger and acquisition reports could get institutional traders on the long side. Intel announced a second buy in less than a month, agreeing to pay $1.4 billion for a business of German firm Infineon that produces products for wireless telephones. Shares of Intel, which is also purchasing McAfee for over $7 billion, fell 2%. 3M released it will shell out $943 million for Cogent, which builds computerized systems that read finger and palm prints. Exciting news came out of the health care sector, where French pharmaceutical firm Sanofi Aventis saw its $18.5 billion bid for Genzyme refused by the biotech company's board. U.S. stocks accelerated declines on Monday after remarks from U.S. President Barack Obama did little to relieve shareholders anxious with the slowing pace of the recovery. Obama said he and his economic team reviewed extra ways to push economic growth, which includes looking at tax cuts for businesses. SPY fell for the entire day striking the vital support area in the 104.40s. Here is the same level it hit two times in the last week. We have a key bull camp around this level which the bears have been not able to overrun going back 15 days. On Tuesday, August 31, 2010, stock-index futures pointed to a new day of losses on Wall Street as a sudden sell off in Tokyo and continuing economic anxieties soured sentiment prior to the release of U.S. housing and consumer-confidence reports. The psychology behind recent price action on SPY implies traders feel the pressure of uncertainty with economic data in days ahead offering opportunities for discontent. World stocks dropped dominated by worries the U.S. economy is sliding back into a recession, caused further flows into safe-haven assets. The yen, popular for carry trades at times of economic stress, went back near a 15-year high against the dollar after traders brushed off Japan's hope to weaken the currency, the Swiss franc soared against the euro and dollar, and yields on benchmark German government bonds hit record lows. Mounting U.S. economic concerns may very well draw investors faraway from riskier assets and push up the yen, keeping pressure on Japan to get involved directly in currency markets for the first time in more than six years. Crude prices, seen as a proxy for world economic growth, also came under pressure, extending losses so far in August to 6.5% and staying on track for their most significant monthly fall since May. Even so, a huge bombshell of news hit. Consumer confidence increased decently in August. Airline stocks reversed earlier losses easing concerns among investors over a softer economy which could result in less flying. The financial sector came roaring back on news pending home sales increased by 5.2%. Economists were forecasting a 0.1% increase. Consumer discretionary stocks also erupted upward following this report. Keep in mind, home equity lines finance purchases in the retail sector. A reduction in overall confidence is depressing markets, and that is unsurprising considering that essentially the most visible areas of economic growth, jobs growth and the unemployment rate, have continued to be disappointing. Additionally, the housing market remains a significant supply of weakness. Stocks ended their most unfortunate August since 2001, battered by a trend of disheartening data that cast doubt around the faltering economic recovery. Investors now enter September, a month which has been historically challenging for the stock market. September declines usually come as companies begin issuing warnings prior to third-quarter results and mutual-fund managers return to work following the typically light volume in the summer. On Wednesday, September 1, 2010, the market soared higher over a better-than-expected manufacturing report. The manufacturing sector posted strong gains after the Institute for Supply Management released its manufacturing index, which said manufacturing activity unexpectedly rose to a reading of 56.3 in August. Economists ended up looking for the ISM index to drop to a reading of 52.9. It was the very first time this index has increased in four months. The buying was massive as more institutional traders went long at higher and higher levels suggesting a crucial short term reversal of psychology by market participants. This manufacturing report suggests that even though the manufacturing sector recovery has slowed somewhat within the last couple of months, the recovery is continuing at a healthy pace. Then more big news hit. Chinese manufacturing increased in August for the first time in four months and the Australian economy saw its best development in three years. Wall Street tallied up its best day in eight weeks on strong manufacturing data in the USA and China. By the end of the day, it was clear, economic data ranging from June house prices to August manufacturing conditions points to ongoing but slow growth in the U.S. economy, casting considerable doubt that there'll be a double-dip recession. This psychological reversal to the bullish side was so profound that SPY broke above its 55 hour moving average line. On Thursday, September 2, 2010, the a 34 hour moving average crossed above the 55 hour. Data established that first-time claims for jobless benefits declined slightly last week. First-time filings for unemployment benefits fell by 6,000 to 472,000 in the latest week, the Labor Department said Thursday. Investors are closely watching employment data for signs of improvement in the employment market. Factory orders also climbed, rising 0.1 percent in July. The increase in orders backs up a report Wednesday showing the manufacturing sector continues to expand. Major indexes jumped more than 2 percent Wednesday following a surprising increase in manufacturing activity. As I talked about last week, merger and acquisition activity will continue. The Burger King hamburger chain agreed to be acquired by equity finance firm 3G Capital. On Friday, September 3, 2010, U.S. stock index futures rose on Friday after data showed the decline in employment was much less than expected in August. This week's burst of buying has largely been sparked by new data on jobs, manufacturing and home sales that, while still weak, suggest fears of a double-dip recession could have been overblown. The news hit that the unemployment rate rose to 9.6%. Nonfarm payrolls fell by 54,000 in August, below the 90,000 drop economists had forecast. Retail stocks exploded upward on the news as investors reacted bullishly to data showing the U.S. economy shed fewer jobs than expected in August while private-sector payrolls expanded more than economists anticipated. Airline stocks edged higher Friday as August traffic reports and economic data directed market anxiety away from the threat of a second recession. Sectors that are considered responsive to economic growth including technology and commodities were the top gainers among mid-cap stocks. Volume should start to pick up starting next week as institutional traders and money managers look to put new money in for the new quarter. My overall opinion of SPY and the market in general is that you must be on the sidelines in cash at this time. That is to say that you need to book profits in your shorts and proceed to the safety of cash. SPY, after 3 tests of the 104.30 support over the last 2 weeks, has stopped being in a downtrend. We are in a sideways trading range and until a definite trend develops, you should be on the sidelines or playing the long side with very strict and tight stop losses in place. |
||||
| Article Source: http://yourfinance.co.za | ||||
|
||||
|
||||
| © 2012 yourfinance.co.za |
