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
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