Stock Market Outlook for July 26, 2010
Upcoming Events for Today:
- The Department of Commerce will release the New Home Sales for June at 10:00am. Market expects 310K versus 300K previous.
The Markets
| Market | Close | % Change | Expected ST Low | Expected ST High |
| Dow Jones Industrial Average (^DJI) | 10,424.62 | 0.99% | 9,844.94 | 10,403.24 |
| Dow Jones Transportation Average (^DJT) | 4,369.71 | 1.54% | 4,018.06 | 4,407.23 |
| Dow Jones Utility Average (^DJU) | 386.76 | 0.00% | 360.46 | 383.50 |
| S&P 500 (^GSPC) | 1,102.66 | 0.82% | 1,039.07 | 1,110.00 |
| S&P/TSE Composite (^GSPTSE) | 11,714.21 | 0.40% | 11,285.00 | 11,897.32 |
| NASDAQ Composite (^IXIC) | 2,269.47 | 1.05% | 2,123.83 | 2,292.12 |
| Austrian Traded Index (^ATX) | 2,402.93 | -0.43% | 2,261.81 | 2,427.33 |
| French CAC 40 (^FCHI) | 3,607.05 | 0.18% | 3,397.60 | 3,684.28 |
| German DAX (^GDAXI) | 6,166.34 | 0.39% | 5,909.68 | 6,229.62 |
| UK FTSE 100 (^FTSE) | 5,312.60 | -0.02% | 4,903.68 | 5,270.77 |
| Swiss Market Index (^SSMI) | 6,201.30 | 0.11% | 6,039.89 | 6,478.17 |
| Brazilian IBOVESPA (^BVSP) | 66,323.00 | 0.87% | 61,665.29 | 65,141.54 |
| Mexico’s IPC (^MXX) | 32,806.03 | 0.26% | 31,416.41 | 32,746.40 |
| Amsterdam Exchange Index (^AEX) | 337.14 | 0.58% | 313.05 | 337.10 |
| Shanghai – SSE Composite Index (000001.ss) | 2,572.03 | 0.38% | 2,388.42 | 2,572.50 |
| New Zealand NZX 50 INDEX GROSS (^NZ50) | 2,994.90 | 0.45% | 2,954.49 | 3,056.31 |
| China HANG SENG INDEX (^HSI) | 20,815.33 | 1.10% | 19,937.79 | 20,784.46 |
| Korea KOSPI Composite Index (^KS11) | 1,758.06 | 1.30% | 1,677.98 | 1,749.08 |
| Tokyo NIKKEI 225 (^N225) | 9,430.96 | 2.28% | 9,246.76 | 10,040.82 |
North American markets rallied on Friday on the back of European Stress Tests that were welcome as a positive sign to reduce some of the uncertainty present within that economy. As mentioned previously on this site, the more that can be done to remove the uncertainty in the market, the better the chances to amount a rally. Earnings are on track to have risen nearly 34% from a year ago, according to Thompson Reuters, European banks are sufficiently funded should a further market dip occur, and the July market rally of close to 7% month-to-date places the present month amongst the best July’s in recent history, but the market remains uncertain. Most active volumes days continue to be seen when the market moves lower, the ratio of companies raising forecasts to those lowering forecasts is the worst in a year at 1 to 3 according to CNNMoney.com, and the Standard & Poor’s Global Investment Policy Committee recommended within the past few days to underweight equities due to “heightened volatility…increasing the range of investment outcomes”. This does not bode well for a sustained rally.
Yet, momentum indicators continue to reveal bullish indicators despite Overbought signals plaguing key indexes. Major indexes in the US overtook their highs achieved in the first half of the month as news of the Stress Test results were revealed. Much of the move that has been attained in the current month has been attributed to sudden pop-up news, such as earnings results. According to seasonal charts, this is common with July/August rallies buoying the market from the June lows. Unfortunately when this news fades, so does the market with a negative September that takes the market into the Fall, both literally and seasonally.
Market sentiment is a bullish 0.84 puts for each call trading hands on Friday, overall a relatively neutral indication as it pertains to the market. The 10-day moving average of this ratio continues to decline as call buying overtakes that of puts, implying a stabilization of the market.
Sectors that Moved the Market
| Sector | % Price Change | % Volume Change |
| Energy Sector (XLE) | 0.45% | -21.82% |
| Basic Materials Sector (XLB) | 2.20% | -9.69% |
| Financial Sector (XLF) | 0.76% | -16.94% |
| Health Care Sector (XLV) | -0.04% | -15.64% |
| Consumer Discretionary Sector (XLY) | 1.45% | -20.82% |
| Industrials Sector (XLI) | 2.00% | 5.42% |
| Technology Sector (XLK) | 0.68% | -11.37% |
| Utilities Sector (XLU) | 0.16% | 29.06% |
| Consumer Staples Sector (XLP) | 0.93% | 43.10% |
Materials and Industrials were the clear leader on the day as enthusiasm surrounding results the day prior from 3M and Caterpillar and news of GE increasing its dividend by 20% added optimism within the sectors. The consumer discretionary sector also showed considerable strength as Ford reported earnings that topped estimates.
Despite the takeover news of biotech company Genzyme on Friday, health care was the only sector to edge lower on the day. For those that have been active readers of Tech Talk, an article published at the start of summer highlighted seasonal plays for “Heating up your portfolio”; six stocks amongst sectors that seasonally perform well over the summer were highlighted. Genzyme was one of the highlights. The stock is up around 22% since the selection.
S&P 500
Chart Courtesy of StockCharts.com
| Support 2 | Support 1 | Pivot Point | Resistance 1 | Resistance 2 |
| 1082.24 | 1092.45 | 1098.09 | 1108.30 | 1113.94 |
Total Returns
Yesterday: 0.82% – Trailing 5 days: 3.55% – Trailing 30 days: 0.97%
Averages for current day based on past 20 years of data
- Current Day: –0.08% with 42.86% of sessions gaining
- Next 7 days: 0.44% with 54.00% of sessions gaining (Max return: 1.33% by July 29 on Average)
- Next 30 days: 0.78% with 53.78% of sessions gaining (Max return: 2.81% by August 11 on Average)
TSE Composite
Chart Courtesy of StockCharts.com
| Support 2 | Support 1 | Pivot Point | Resistance 1 | Resistance 2 |
| 11586.88 | 11650.55 | 11686.59 | 11750.26 | 11786.30 |
Total Returns
Yesterday: 0.40% – Trailing 5 days: 1.25% – Trailing 30 days: –0.79%
Averages for current day based on past 20 years of data
- Current Day: –0.13% with 57.14% of sessions gaining
- Next 7 days: 0.19% with 57.50% of sessions gaining (Max return: 1.27% by July 29 on Average)
- Next 30 days: 1.23% with 52.83% of sessions gaining (Max return: 2.74% by August 11 on Average)
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