Analysis:
On Sept. 27 the Analysis predicted that "the market has found its short-term top at 1,150." Today all economic statistics came in better than the consensus, especially the Chicago PMI exceeding the consensus by a large margin. The market broke through the resistance at 1,150 to a high of 1,157, but once the Bears covered their short positions, the market dropped back below 1,150 and spent the remainder of the day in red. Moreover, nine out of the 10 S&P 500 sectors declined, signaling the breadth of the market retreat. The financial news quotes market pundit giving the reason as "the end of quarter rebalancing," but the real reason is that "the market has found its short-term top at 1,150." The Bulls should consider taking profits, not because being bullish is wrong, but because a reaction will give the Bulls an opportunity to get in at a lower price.
Looking ahead to tomorrow, the Consumer Spending will disappoint, and the core PCE index will be flat or negative, as retailers lured shoppers into buying with large discounts in Aug. The market mover will be a disappointing ISM manufacturing index. Just as a positively surprising ISM manufacturing index on Sept. 1 laid the foundation for the current "stealth rally," a negatively surprising reading tomorrow will further reinforce 1,150 as the near-term market top.
Strategy:
Hold short at 1,122
Thursday, September 30, 2010
Wednesday, September 29, 2010
S&P 500 Index Analysis (9/29/2010)
Anaylsis:
Yesterday's Analysis predicted that today "will be a day of consolidation in the 1,131-1,150 range," and today the market did trade in a relatively narrow range. Looking ahead to tomorrow, barring a significant positive surprise of the final Q2 GDP, the Chicago PMI will be lower than the consensus and accelerate the selling of the market that already opens lower due to Moody's downgrade of Spanish bond rating overnight. As a result, the market will close below 1,131.
Strategy:
Hold short at 1,122
Yesterday's Analysis predicted that today "will be a day of consolidation in the 1,131-1,150 range," and today the market did trade in a relatively narrow range. Looking ahead to tomorrow, barring a significant positive surprise of the final Q2 GDP, the Chicago PMI will be lower than the consensus and accelerate the selling of the market that already opens lower due to Moody's downgrade of Spanish bond rating overnight. As a result, the market will close below 1,131.
Strategy:
Hold short at 1,122
Tuesday, September 28, 2010
S&P 500 Index Analysis (9/28/2010)
Analysis:
Yesterday's Analysis predicted that "the Consumer Sentiment will be lower than the consensus," and today it came in much lower than the consensus. The market sold off on the news until it hit the support at 1,131 and then bounced to resistance at 1,150 before closing higher in a day largely dominated by technical trading. Looking ahead to tomorrow, it is doubtful that the PMI out of China will give the market a direction, so it will be a day of consolidation in the 1,131-1,150 range as the Bulls and the Bears take their respective positions for more economic news later this week, the Bulls betting on more corporate mergers while the Bears betting on uninspiring economic statistics.
Strategy:
Hold short at 1,122
Yesterday's Analysis predicted that "the Consumer Sentiment will be lower than the consensus," and today it came in much lower than the consensus. The market sold off on the news until it hit the support at 1,131 and then bounced to resistance at 1,150 before closing higher in a day largely dominated by technical trading. Looking ahead to tomorrow, it is doubtful that the PMI out of China will give the market a direction, so it will be a day of consolidation in the 1,131-1,150 range as the Bulls and the Bears take their respective positions for more economic news later this week, the Bulls betting on more corporate mergers while the Bears betting on uninspiring economic statistics.
Strategy:
Hold short at 1,122
Monday, September 27, 2010
S&P 500 Index Analysis (9/27/2010)
Analysis:
Today the fact that the market did not take out the 1,150 resistance is a surprise, given the backdrop of Unilever's acquisition of Alberto-Culver and Southwest's offer for AirTran, and to say that the failure of M&T Bank's merger with Santander outweighs the other two would be convincing to the gullible. Now the Bulls should consider taking profits, not because being bullish is wrong, but because the market has found its short-term top at 1,150 and will reach 1,120 before hitting 1,150. Looking ahead to tomorrow, the Case-Shiller Housing Price Index will bring a major disappointment that the Bulls may use to liquidate their long positions, and the Consumer Sentiment will be lower than the consensus, again dragged by the dim outlook for employment and dwindling household asset values including home prices, whose shrinking values will have been confirmed by the earlier Case-Shiller HPI, and stock holdings (because most retail investors did not catch the early part of the market rally since Sept. 1).
Strategy:
Hold short at 1,122 (Correction: The Strategy for Friday should have stated "hold short at 1,122 with a bias to exit short position" because otherwise it would have stated something along the line "offset short at 1,140 for a loss of 18 points." Mea culpa.)
Today the fact that the market did not take out the 1,150 resistance is a surprise, given the backdrop of Unilever's acquisition of Alberto-Culver and Southwest's offer for AirTran, and to say that the failure of M&T Bank's merger with Santander outweighs the other two would be convincing to the gullible. Now the Bulls should consider taking profits, not because being bullish is wrong, but because the market has found its short-term top at 1,150 and will reach 1,120 before hitting 1,150. Looking ahead to tomorrow, the Case-Shiller Housing Price Index will bring a major disappointment that the Bulls may use to liquidate their long positions, and the Consumer Sentiment will be lower than the consensus, again dragged by the dim outlook for employment and dwindling household asset values including home prices, whose shrinking values will have been confirmed by the earlier Case-Shiller HPI, and stock holdings (because most retail investors did not catch the early part of the market rally since Sept. 1).
Strategy:
Hold short at 1,122 (Correction: The Strategy for Friday should have stated "hold short at 1,122 with a bias to exit short position" because otherwise it would have stated something along the line "offset short at 1,140 for a loss of 18 points." Mea culpa.)
Friday, September 24, 2010
S&P 500 Index Analysis (9/24/2010)
Analysis:
Yesterday's Analysis predicted that "unless the market can immediately reverse itself tomorrow to close above 1,131, the Bears will be emboldened and become very aggressive in attempts to push the market below 1,088." Today the Bears did not give the Bulls that opportunity to be emboldened, and the market recovered the previous three days' cumulative losses to close higher. This week has seen an epic battle between the Bulls and the Bears, the the Bulls had an upper hand. Looking ahead to next week, the market will find positive news to embrace and continue to rise.
Strategy:
Exit short position
Yesterday's Analysis predicted that "unless the market can immediately reverse itself tomorrow to close above 1,131, the Bears will be emboldened and become very aggressive in attempts to push the market below 1,088." Today the Bears did not give the Bulls that opportunity to be emboldened, and the market recovered the previous three days' cumulative losses to close higher. This week has seen an epic battle between the Bulls and the Bears, the the Bulls had an upper hand. Looking ahead to next week, the market will find positive news to embrace and continue to rise.
Strategy:
Exit short position
Thursday, September 23, 2010
S&P 500 Index Analysis (9/23/2010)
Analysis:
Yesterday's Analysis predicted that "the Initial Jobless Claims will stay above 450,000," and they came in as 465,000. The market opened lowered and bounced off the Leading Economic Index and Existing Home Sales. The former is an abstract number that is intangible, while the latter are the second lowest in history and look better only because the previous sales were the lowest in history. The market could not stay above 1,131 and fell within the trading range since mid-May. Unless the market can immediately reverse itself tomorrow to close above 1,131, the Bears will be enboldened and become very aggressive in attempts to push the market below 1,088 (hopefully not tomorrow). Looking ahead to tomorrow, AMD's lowering its corporate guidance may herald another round of disappointing corporate guidance before the earnings season, and a Durable Goods Order in line with consensus would only confirm the false breakout of the market early this week.
Strategy:
Hold short at 1,122
Yesterday's Analysis predicted that "the Initial Jobless Claims will stay above 450,000," and they came in as 465,000. The market opened lowered and bounced off the Leading Economic Index and Existing Home Sales. The former is an abstract number that is intangible, while the latter are the second lowest in history and look better only because the previous sales were the lowest in history. The market could not stay above 1,131 and fell within the trading range since mid-May. Unless the market can immediately reverse itself tomorrow to close above 1,131, the Bears will be enboldened and become very aggressive in attempts to push the market below 1,088 (hopefully not tomorrow). Looking ahead to tomorrow, AMD's lowering its corporate guidance may herald another round of disappointing corporate guidance before the earnings season, and a Durable Goods Order in line with consensus would only confirm the false breakout of the market early this week.
Strategy:
Hold short at 1,122
Wednesday, September 22, 2010
S&P 500 Index Analysis (9/22/2010)
Analysis:
Yesterday's Analysis predicted that "as the market continues to digest the Fed Announcement along with these data, it will sell off by the end of the day." Today the market did close lower, although one could argue that such a prediction always has a 50% chance of being correct. Nothing can be said about today's market action except that, truly, it is digesting the Fed's Announcement. Looking ahead to tomorrow, the Initial Jobless Claims will stay above 450,000, and the housing data will bounce off historic lows, although the extent of the rebound is uncertain.
Strategy:
Hold short at 1,122
Yesterday's Analysis predicted that "as the market continues to digest the Fed Announcement along with these data, it will sell off by the end of the day." Today the market did close lower, although one could argue that such a prediction always has a 50% chance of being correct. Nothing can be said about today's market action except that, truly, it is digesting the Fed's Announcement. Looking ahead to tomorrow, the Initial Jobless Claims will stay above 450,000, and the housing data will bounce off historic lows, although the extent of the rebound is uncertain.
Strategy:
Hold short at 1,122
Tuesday, September 21, 2010
S&P 500 Index Analysis (9/21/2010)
Analysis:
Today's Fed Announcement contains no surprise, and the market shot up briefly before settling lower. The Fed Announcement offers no sanguine picture of the economy but hints that the economy has veered towards the wrong track -- an inflation rate that is so low that the Fed may need to step in to pop it up, i.e., QE2. But since no Fed action is imminent, the Fed's assessment of the economy bears only bearish implication for the market. Looking ahead to tomorrow, the Initial Jobless Claims will stay above 450,000, and the housing data will bounce off historic lows. As the market continues to digest the Fed Announcement along with these data, it will sell off by the end of the day. In the next few days, the market will need either to close above 1,150 to confirm the resumption of a bullish trend or to close below 1,100 to scare off the retail investors who have jumped on the bandwagon in Sept. (Each time when bullish retail investors exceeded bearish retail investors by such a magnitude since 2006, the market has invariably declined.)
Strategy:
Hold short at 1,122
Today's Fed Announcement contains no surprise, and the market shot up briefly before settling lower. The Fed Announcement offers no sanguine picture of the economy but hints that the economy has veered towards the wrong track -- an inflation rate that is so low that the Fed may need to step in to pop it up, i.e., QE2. But since no Fed action is imminent, the Fed's assessment of the economy bears only bearish implication for the market. Looking ahead to tomorrow, the Initial Jobless Claims will stay above 450,000, and the housing data will bounce off historic lows. As the market continues to digest the Fed Announcement along with these data, it will sell off by the end of the day. In the next few days, the market will need either to close above 1,150 to confirm the resumption of a bullish trend or to close below 1,100 to scare off the retail investors who have jumped on the bandwagon in Sept. (Each time when bullish retail investors exceeded bearish retail investors by such a magnitude since 2006, the market has invariably declined.)
Strategy:
Hold short at 1,122
Monday, September 20, 2010
S&P 500 Index Analysis (9/20/2010)
Analysis:
Friday's Analysis predicted that "the PIGS saga will continue out of Europe," and it did, as the spread of the Irish bond over the Bund surged to a record today. But Europe's financial woes were no concern to the market, at least today, as the market rose to a four-month high. No one can damp the market's bullish sentiment except the Fed. Tomorrow the Fed will lower its economic forecast for the remaining two quarters of this year and reiterate that the economic slowdown becomes more widespread than it had seen after the Aug. meeting. Upon the release of the Fed's statement, the market will sell off and close below 1,131. In the unlikely event that the market continues to rise to close above 1,150, that would spell the end of any lingering doubt about the resumption of a bullish trend targeting 1,200-1,220 by the year end.
Strategy:
Hold short at 1,122
Friday's Analysis predicted that "the PIGS saga will continue out of Europe," and it did, as the spread of the Irish bond over the Bund surged to a record today. But Europe's financial woes were no concern to the market, at least today, as the market rose to a four-month high. No one can damp the market's bullish sentiment except the Fed. Tomorrow the Fed will lower its economic forecast for the remaining two quarters of this year and reiterate that the economic slowdown becomes more widespread than it had seen after the Aug. meeting. Upon the release of the Fed's statement, the market will sell off and close below 1,131. In the unlikely event that the market continues to rise to close above 1,150, that would spell the end of any lingering doubt about the resumption of a bullish trend targeting 1,200-1,220 by the year end.
Strategy:
Hold short at 1,122
Friday, September 17, 2010
S&P 500 Index Analysis (9/17/2010)
Analysis:
Yesterday's Analysis predicted that "the depressed home prices may continue to outweigh the improvement in employment outlook," and that "the CPI excluding food and energy will be flat or negative, as retailers lured shoppers into spending with large discounts." Today the Consumer Sentiment came in worse than the most pessimistic forecast, and the CPI excluding food and energy was flat in Aug.
Looking ahead to next week, the market will be fixated to the Fed's announcement on Tue., and the Fed will remind the market of the precarious economic condition with a language that is sterner than its Aug. announcement. But it is the Master itself that is also in a precarious situation because if it does not undertake QE2 (not your majesty's cruise ship) on Tue., it will be odd for it to act after the next meeting on the day after mid-term election. The PIGS saga will continue out of Europe and weigh on US financial stocks. Given the fact that the S&P 500 rally has been led by technology stocks, when the Nasdaq 100 takes a respite after rising for eight straight days, the S&P 500 may as well follow suit on Monday.
Strategy:
Hold short at 1,122
Yesterday's Analysis predicted that "the depressed home prices may continue to outweigh the improvement in employment outlook," and that "the CPI excluding food and energy will be flat or negative, as retailers lured shoppers into spending with large discounts." Today the Consumer Sentiment came in worse than the most pessimistic forecast, and the CPI excluding food and energy was flat in Aug.
Looking ahead to next week, the market will be fixated to the Fed's announcement on Tue., and the Fed will remind the market of the precarious economic condition with a language that is sterner than its Aug. announcement. But it is the Master itself that is also in a precarious situation because if it does not undertake QE2 (not your majesty's cruise ship) on Tue., it will be odd for it to act after the next meeting on the day after mid-term election. The PIGS saga will continue out of Europe and weigh on US financial stocks. Given the fact that the S&P 500 rally has been led by technology stocks, when the Nasdaq 100 takes a respite after rising for eight straight days, the S&P 500 may as well follow suit on Monday.
Strategy:
Hold short at 1,122
Thursday, September 16, 2010
S&P 500 Index Analysis (9/16/2010)
Analysis:
Yesterday's Analysis predicted that "the Philadelphia Fed Survey will bring no positive surprise. This will give the market the reason to take profit and close lower." Today the Survey came in negative, and the market spent most of the day in the negative territory and closed a fraction of a point lower. Looking ahead to tomorrow, the Consumer Sentiment is difficult to predict because the depressed home prices may continue to outweigh the improvement in employment outlook. The CPI excluding food and energy will be flat or negative, as retailers lured shoppers into spending with large discounts. The concern on the economy will give the market that fails to break resistance a reason to drop to as low as 1,110.
Strategy:
Sold short at 1,122
Yesterday's Analysis predicted that "the Philadelphia Fed Survey will bring no positive surprise. This will give the market the reason to take profit and close lower." Today the Survey came in negative, and the market spent most of the day in the negative territory and closed a fraction of a point lower. Looking ahead to tomorrow, the Consumer Sentiment is difficult to predict because the depressed home prices may continue to outweigh the improvement in employment outlook. The CPI excluding food and energy will be flat or negative, as retailers lured shoppers into spending with large discounts. The concern on the economy will give the market that fails to break resistance a reason to drop to as low as 1,110.
Strategy:
Sold short at 1,122
Wednesday, September 15, 2010
S&P 500 Index Analysis (9/15/2010)
Analysis:
Today both the Empire State Survey and the Industrial Production came in line with consensus, and the market rode on its momentum to close higher. Looking ahead to tomorrow, the Initial Jobless Claims will surprise on the higher side to above 460,000, as they make up for the missed claims last week. The Philadelphia Fed Survey will bring no positive surprise. This will give the market the reason to take profit and close lower.
Strategy:
Sell short at 1,123
Today both the Empire State Survey and the Industrial Production came in line with consensus, and the market rode on its momentum to close higher. Looking ahead to tomorrow, the Initial Jobless Claims will surprise on the higher side to above 460,000, as they make up for the missed claims last week. The Philadelphia Fed Survey will bring no positive surprise. This will give the market the reason to take profit and close lower.
Strategy:
Sell short at 1,123
Tuesday, September 14, 2010
S&P 500 Index Analysis (9/14/2010)
Analysis:
Yesterday's Analysis predicted that "the market will continue its upward momentum to find and test a resistance in the absence of negative surprises in retail sales and business inventories." Today there were no negative surprises in retail sales and business inventories, and the market spent most the day higher before closing a fraction of a point lower. Looking ahead to tomorrow, the Empire State Manufacturing Survey will come in line with consensus or be better, and the Industrial Production will surprise on the upside by a significant margin. The market will open higher to test the resistance but fail to take it out.
Strategy:
Sell short at 1,125
Yesterday's Analysis predicted that "the market will continue its upward momentum to find and test a resistance in the absence of negative surprises in retail sales and business inventories." Today there were no negative surprises in retail sales and business inventories, and the market spent most the day higher before closing a fraction of a point lower. Looking ahead to tomorrow, the Empire State Manufacturing Survey will come in line with consensus or be better, and the Industrial Production will surprise on the upside by a significant margin. The market will open higher to test the resistance but fail to take it out.
Strategy:
Sell short at 1,125
Monday, September 13, 2010
S&P 500 Index Analysis (9/13/2010)
Analysis:
Friday's Analysis predicted that "the market clearly has turned bullish," and the market did, closing 12.35 points higher on the backdrop of robust growth in industrial production in China. Looking ahead to tomorrow, the market will continue its upward momentum to find and test a resistance in the absence of negative surprises in retail sales and business inventories.
Strategy:
Sell short at 1,124
Friday's Analysis predicted that "the market clearly has turned bullish," and the market did, closing 12.35 points higher on the backdrop of robust growth in industrial production in China. Looking ahead to tomorrow, the market will continue its upward momentum to find and test a resistance in the absence of negative surprises in retail sales and business inventories.
Strategy:
Sell short at 1,124
Friday, September 10, 2010
S&P 500 Index Analysis (9/10/2010)
Analysis:
After much wrangling between the Bulls and Bears, the Bulls prevailed on the backdrop of a promising wholesale inventory report and proved yesterday's Analysis wrong. Looking ahead to next week, the market clearly has turned bullish, as it would focus on any positive economic news to rise regardless of the fundamentals. There will be an opportunity to get on the short side again as the market continues to rise. Next week's economic news will not be consistent in one direction, and a confluence of information offering diverging indications of the economic conditions makes the Analysis' prediction next week more challenging than before.
Strategy:
Offset short at 1,109.50 for a loss of 29.50
After much wrangling between the Bulls and Bears, the Bulls prevailed on the backdrop of a promising wholesale inventory report and proved yesterday's Analysis wrong. Looking ahead to next week, the market clearly has turned bullish, as it would focus on any positive economic news to rise regardless of the fundamentals. There will be an opportunity to get on the short side again as the market continues to rise. Next week's economic news will not be consistent in one direction, and a confluence of information offering diverging indications of the economic conditions makes the Analysis' prediction next week more challenging than before.
Strategy:
Offset short at 1,109.50 for a loss of 29.50
Thursday, September 9, 2010
S&P 500 Index Analysis (9/9/2010)
Analysis:
Yesterday’s Analysis predicted that “the trade deficit will likely surprise on the narrower side,” and “the Initial Jobless Claims will also surprise on the lower side as they edge further towards 450,000.” Today the trade deficit did come in lower than forecast, and the Initial Jobless Claims came out as 451,000.
Yesterday’s Analysis predicted that “the market’s initial reactions will rise, but as the day goes on, the market’s lack of momentum to pull away from the congested 1,100-1,105 area will prompt profit-taking.” Today after the open the market did rise to as high as 1,110 but could not hold above 1,105 and closed at 1,104, ostensibly due to the concern about Deutsche Bank’s capital sufficiency.
Looking ahead to tomorrow, to borrow the language of the Analysis of Aug. 31, “the Bears should feel tired, as the market stubbornly refused to follow any prodding to plunge below 1,040,” the Bulls should feel tired, as the market stubbornly refused to follow any prodding to soar beyond 1,105. The market will find a reason to drop, and the reason most likely will come from Europe.
Strategy:
Hold short at 1,080 and stop loss if the market closes above 1,108
Yesterday’s Analysis predicted that “the trade deficit will likely surprise on the narrower side,” and “the Initial Jobless Claims will also surprise on the lower side as they edge further towards 450,000.” Today the trade deficit did come in lower than forecast, and the Initial Jobless Claims came out as 451,000.
Yesterday’s Analysis predicted that “the market’s initial reactions will rise, but as the day goes on, the market’s lack of momentum to pull away from the congested 1,100-1,105 area will prompt profit-taking.” Today after the open the market did rise to as high as 1,110 but could not hold above 1,105 and closed at 1,104, ostensibly due to the concern about Deutsche Bank’s capital sufficiency.
Looking ahead to tomorrow, to borrow the language of the Analysis of Aug. 31, “the Bears should feel tired, as the market stubbornly refused to follow any prodding to plunge below 1,040,” the Bulls should feel tired, as the market stubbornly refused to follow any prodding to soar beyond 1,105. The market will find a reason to drop, and the reason most likely will come from Europe.
Strategy:
Hold short at 1,080 and stop loss if the market closes above 1,108
Wednesday, September 8, 2010
S&P 500 Index Analysis (9/8/2010)
Analysis:
Below are comparisons of the language in yesterday’s Analysis and in the Fed’s Beige Book:
Analysis: “Manufacturing activities continue to grow but at a decelerated pace.”
Beige Book: “Reports on manufacturing activity pointed to further expansion, although the pace of growth eased.”
Analysis: “The growth in retail sales will be limited.”
Beige Book: “Consumer spending appeared to increase on balance despite continued consumer caution that limited nonessential purchases.”
Today the market dropped after the release of the Beige Book but ended the day higher. Looking ahead to tomorrow, the trade deficit will likely surprise on the narrower side due to the strength of the US dollar in July, and the Initial Jobless Claims will also surprise on the lower side as they edge further towards 450,000. The market’s initial reactions will rise, but as the day goes on, the market’s lack of momentum to pull away from the congested 1,100-1,105 area will prompt profit-taking and send the market lower at close.
Strategy:
Hold short at 1,080
Below are comparisons of the language in yesterday’s Analysis and in the Fed’s Beige Book:
Analysis: “Manufacturing activities continue to grow but at a decelerated pace.”
Beige Book: “Reports on manufacturing activity pointed to further expansion, although the pace of growth eased.”
Analysis: “The growth in retail sales will be limited.”
Beige Book: “Consumer spending appeared to increase on balance despite continued consumer caution that limited nonessential purchases.”
Today the market dropped after the release of the Beige Book but ended the day higher. Looking ahead to tomorrow, the trade deficit will likely surprise on the narrower side due to the strength of the US dollar in July, and the Initial Jobless Claims will also surprise on the lower side as they edge further towards 450,000. The market’s initial reactions will rise, but as the day goes on, the market’s lack of momentum to pull away from the congested 1,100-1,105 area will prompt profit-taking and send the market lower at close.
Strategy:
Hold short at 1,080
Tuesday, September 7, 2010
S&P 500 Index Analysis (9/7/2010)
Analysis:
Today the market decided that it was time to take the profit accumulated over the previous four trading days, and it found a reason -- the European debt concern, which has been there since May, so the market gave up all its gains driven by the Employment Report last Friday. Looking ahead to tomorrow, the Beige Book will look ocher and will be devoid of any sanguine look the Bulls would like to see. Manufacturing activities continue to grow but at a decelerated pace that are unlikely to pick up the steam before year end, while the slowdown in the service sectors will be more pronounced. The less somber news will be that the housing sector has stabilized, not because buyers are eager to own their new digs, but because housing activities cannot be slower compared to already historical lows; however, any pick-up in the housing sector is not in the offing, as the inventory is bloated with foreclosed and short-sold houses. Most importantly, the employment situation remains dire, as businesses are cautious in their outlook for the next six months. As a result, the growth in retail sales will be limited.
The market will be reminded of the precarious state of the economy under "unusual uncertainty." As a result, the market will drop after the release of the Beige Book at 2 p.m. and close below 1,084 to set the stage for some congested trading in the 1,060-1,080 range in the next few trading sessions.
Strategy:
Hold short at 1,080
Today the market decided that it was time to take the profit accumulated over the previous four trading days, and it found a reason -- the European debt concern, which has been there since May, so the market gave up all its gains driven by the Employment Report last Friday. Looking ahead to tomorrow, the Beige Book will look ocher and will be devoid of any sanguine look the Bulls would like to see. Manufacturing activities continue to grow but at a decelerated pace that are unlikely to pick up the steam before year end, while the slowdown in the service sectors will be more pronounced. The less somber news will be that the housing sector has stabilized, not because buyers are eager to own their new digs, but because housing activities cannot be slower compared to already historical lows; however, any pick-up in the housing sector is not in the offing, as the inventory is bloated with foreclosed and short-sold houses. Most importantly, the employment situation remains dire, as businesses are cautious in their outlook for the next six months. As a result, the growth in retail sales will be limited.
The market will be reminded of the precarious state of the economy under "unusual uncertainty." As a result, the market will drop after the release of the Beige Book at 2 p.m. and close below 1,084 to set the stage for some congested trading in the 1,060-1,080 range in the next few trading sessions.
Strategy:
Hold short at 1,080
Friday, September 3, 2010
S&P 500 Index Analysis (9/3/2010)
Analysis:
Yesterday's Analysis is proved exactly the opposite. The private payroll surprised on the upside, and the ISM non-manufacturing index surprised on the downside, "which did not save the [Bears] from the [cheering] private payroll number." Looking ahead to next week, the market will likely build on the current upward momentum, but given the magnitude of the rise in the last four trading days, it may well drop due to profit-taking.
Strategy:
Offset short at 1,083
Yesterday's Analysis is proved exactly the opposite. The private payroll surprised on the upside, and the ISM non-manufacturing index surprised on the downside, "which did not save the [Bears] from the [cheering] private payroll number." Looking ahead to next week, the market will likely build on the current upward momentum, but given the magnitude of the rise in the last four trading days, it may well drop due to profit-taking.
Strategy:
Offset short at 1,083
Thursday, September 2, 2010
S&P 500 Index Analysis (9/2/2010)
Analysis:
Today the Initial Jobless Claims came in as no surprise, as the Analysis predicted yesterday, but the Pending Home Sales Index was better than the consensus forecast, which gave the market the reason to rise.
Tomorrow is the Judgment Day -- to the Bulls, to be precise, and the Bears' trump card is the Employment Report. The Employment Report will likely surprise on the downside that will at least wipe out all today's gain if the private payroll increase is in the positive 20,000s, and there is some probability that the number may come in negative, which will set the tone for the Sept. market to plunge below 1,040. The ISM non-manufacturing index will likely surprise on the upside, but that will not save the Bulls from the disappointing private payroll number.
Strategy
Hold short at 1,080
Today the Initial Jobless Claims came in as no surprise, as the Analysis predicted yesterday, but the Pending Home Sales Index was better than the consensus forecast, which gave the market the reason to rise.
Tomorrow is the Judgment Day -- to the Bulls, to be precise, and the Bears' trump card is the Employment Report. The Employment Report will likely surprise on the downside that will at least wipe out all today's gain if the private payroll increase is in the positive 20,000s, and there is some probability that the number may come in negative, which will set the tone for the Sept. market to plunge below 1,040. The ISM non-manufacturing index will likely surprise on the upside, but that will not save the Bulls from the disappointing private payroll number.
Strategy
Hold short at 1,080
Wednesday, September 1, 2010
S&P 500 Index Analysis (9/1/2010)
Anaylsis:
On August 30 the Analysis predicted “the market to recoup all today’s losses” the following day, which was yesterday. The market did not recoup all the losses yesterday, but did so convincingly today. On August 31 the Analysis predicted that “the PMI will likely surprise on the upside, which will prod the market higher,” and today the PMI did surprise on the upside and propelled the market higher after 10 a.m.
The market opened higher, ostensibly driven by the marginally higher manufacturing PMI reading out of China overnight, but the real reason is what the Analysis remarked yesterday, “the Bears should feel tired, as the market stubbornly refused to follow any prodding to plunge below 1,040.” Once the manufacturing PMI was released at 10 a.m., the market released all the pent-up force against the Bears. Today’s rally clearly is a short-covering rally, because the market completely ignored any negative news, as the worse-than-forecast Construction Spending did no damage to the Bulls.
Looking ahead to tomorrow, the Jobless Claims will not be a surprise in either direction. Chairman Bernanke will use a speech opportunity to dispel any market doubt on the FOMC’s willingness to act in unity if another round of QE is needed, but he will also signal that no such action is imminent. His speech will drive the market to open higher until the Pending Home Sales Index one hour later reminds the Bulls of the economic reality in contrast to today’s euphoria. The market will test the resistance in the 1,080-1,084 area but should close lower when Friday’s judgment-day mentality sets in.
Strategy:
Long stopped out at 1,075; sold at 1,080
On August 30 the Analysis predicted “the market to recoup all today’s losses” the following day, which was yesterday. The market did not recoup all the losses yesterday, but did so convincingly today. On August 31 the Analysis predicted that “the PMI will likely surprise on the upside, which will prod the market higher,” and today the PMI did surprise on the upside and propelled the market higher after 10 a.m.
The market opened higher, ostensibly driven by the marginally higher manufacturing PMI reading out of China overnight, but the real reason is what the Analysis remarked yesterday, “the Bears should feel tired, as the market stubbornly refused to follow any prodding to plunge below 1,040.” Once the manufacturing PMI was released at 10 a.m., the market released all the pent-up force against the Bears. Today’s rally clearly is a short-covering rally, because the market completely ignored any negative news, as the worse-than-forecast Construction Spending did no damage to the Bulls.
Looking ahead to tomorrow, the Jobless Claims will not be a surprise in either direction. Chairman Bernanke will use a speech opportunity to dispel any market doubt on the FOMC’s willingness to act in unity if another round of QE is needed, but he will also signal that no such action is imminent. His speech will drive the market to open higher until the Pending Home Sales Index one hour later reminds the Bulls of the economic reality in contrast to today’s euphoria. The market will test the resistance in the 1,080-1,084 area but should close lower when Friday’s judgment-day mentality sets in.
Strategy:
Long stopped out at 1,075; sold at 1,080
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