Stock Market Outlook for September 1, 2010
Upcoming Events for Today:
- The ADP Employment Change for August will be reported at 8:15am. Market expects an increase of 13K versus an increase of 42K previous.
- Construction Spending for July will be released at 10:00am. Market expects a decline by 0.7% versus an increase of 0.1% previous.
- The ISM Index for August will be released at 10:00am. Market expects 52.9 versus 55.5 previous.
- Weekly Crude Inventories will be released at 10:30am
- Automobile sales for August will be released throughout the day
The Markets
| Market | Close | % Change | Expected ST Low | Expected ST High |
| Dow Jones Industrial Average (^DJI) | 10,014.72 | 0.05% | 10,067.04 | 10,637.52 |
| Dow Jones Transportation Average (^DJT) | 4,122.63 | 0.28% | 4,119.89 | 4,475.35 |
| Dow Jones Utility Average (^DJU) | 388.97 | 0.45% | 378.68 | 393.47 |
| S&P 500 (^GSPC) | 1,049.33 | 0.04% | 1,055.57 | 1,121.55 |
| S&P/TSE Composite (^GSPTSE) | 11,913.86 | 0.15% | 11,557.64 | 11,847.93 |
| NASDAQ Composite (^IXIC) | 2,114.03 | -0.28% | 2,134.59 | 2,291.08 |
| Austrian Traded Index (^ATX) | 2,402.02 | -0.68% | 2,385.60 | 2,526.58 |
| French CAC 40 (^FCHI) | 3,490.79 | 0.11% | 3,484.60 | 3,743.03 |
| German DAX (^GDAXI) | 5,925.22 | 0.22% | 5,931.12 | 6,303.99 |
| UK FTSE 100 (^FTSE) | 5,225.20 | 0.45% | 5,160.15 | 5,375.22 |
| Swiss Market Index (^SSMI) | 6,180.90 | -0.39% | 6,144.42 | 6,361.73 |
| Brazilian IBOVESPA (^BVSP) | 65,145.00 | 1.38% | 64,798.78 | 68,035.31 |
| Mexico’s IPC (^MXX) | 31,679.85 | 0.95% | 31,538.11 | 32,846.49 |
| Amsterdam Exchange Index (^AEX) | 316.47 | 0.29% | 314.77 | 337.87 |
| New Zealand NZX 50 INDEX GROSS (^NZ50) | 3,036.10 | -0.02% | 3,002.22 | 3,046.42 |
| China HANG SENG INDEX (^HSI) | 20,536.49 | -0.97% | 20,578.96 | 21,555.52 |
| Korea KOSPI Composite Index (^KS11) | 1,742.75 | -0.99% | 1,735.41 | 1,784.09 |
| Tokyo NIKKEI 225 (^N225) | 8,824.06 | -3.55% | 8,968.15 | 9,652.87 |
Markets closed the month of August relatively flat following a better than expected housing report and consumer confidence survey which provided strength to stocks until mid-afternoon when the FOMC minutes were released. The Fed’s cautionary tale in the notes released indicated that action would only be taken if conditions were to substantially worsen. A severe market degradation beyond current levels may be too late for meaningful intervention as much of the Fed’s tools and resources have already been utilized. The obvious goal is for the economy to form its own equilibrium in order to bring about sustainable results and many economists believe that that equilibrium will be found at lower levels, leaving interventionist policy at that point rather unnecessary. So it remains a waiting game as to how and when the Fed will react, if at all, and will any action be beneficial for long-term economic sustainability.
Markets continue very close to oversold levels that have stayed with key indices for a few weeks now. The S&P 500 yet again tested the 1040 support in Tuesday’s market action, while the Dow held firmly to the psychological 10,000 level that seems to be acting as a barrier to buy and sell decisions. Yet, technical indicators appear to be setting up for a possible buy signal, ignoring any fundamental tailwinds that continue to push the markets lower. Charts continue to maintain the downward trend initiated at the beginning of August and seasonal factors for mid-term elections years confirm the trend through to October. Therefore any buy signals in the short term should be taken with a bit of scrutiny and caution as timing may be short-lived as the October lows appear to be the final market goal.
A report out of China released overnight may add optimism to trading in North American markets on Wednesday. The report indicated an expansion in manufacturing as two PMI surveys noted growth over the previous month, exceeding the forecasts of analysts covering the economic reading. Futures moved strongly higher on the release, giving markets a good starting point prior to investors entering the game on Wednesday.
A put/call ratio of 0.92 on Tuesday was slightly bullish for the market coming off of the ratio of 0.98 recorded in the session previous. Put trading continues to be significant as investors seek protection for portfolio positions.
Sectors that Moved the Market
| Sector | % Price Change | % Volume Change |
| Energy Sector (XLE) | -0.27% | 91.98% |
| Basic Materials Sector (XLB) | 0.42% | 88.87% |
| Financial Sector (XLF) | 0.89% | 67.13% |
| Health Care Sector (XLV) | -0.39% | 50.06% |
| Consumer Discretionary Sector (XLY) | 0.13% | 6.01% |
| Industrials Sector (XLI) | -0.39% | 30.82% |
| Technology Sector (XLK) | -0.34% | 104.39% |
| Utilities Sector (XLU) | 0.46% | 6.52% |
| Consumer Staples Sector (XLP) | 0.08% | 55.14% |
Financials rebounded from the weak performance recorded during Monday’s session and posted gains impeding on 1% for the day. Although the trend remains down, technical indicators are lining up for a possible buy signal. Seasonal tendencies for the next month are relatively neutral. A significant decline in the price of oil led energy stocks to be one of the weaker performers on the day. Previous expectations of oil supplies being affected have been unfounded as hurricane season has not shown any detrimental effects thus far and demand from the summer driving season has not materialized as anticipated.
S&P 500 Index
Chart Courtesy of StockCharts.com
| Support 2 | Support 1 | Pivot Point | Resistance 1 | Resistance 2 |
| 1034.19 | 1041.76 | 1048.45 | 1056.02 | 1062.71 |
Total Returns
Yesterday: 0.04% – Trailing 5 days: –0.24% – Trailing 30 days: –4.74%
Averages for current day based on past 20 years of data
- Current Day: 0.34% with 72.73% of sessions gaining
- Next 7 days: –0.12% with 50.00% of sessions gaining (Max return: 0.98% by September 3 on Average)
- Next 30 days: –0.76% with 51.70% of sessions gaining (Max return: 2.61% by September 13 on Average)
TSE Composite
Chart Courtesy of StockCharts.com
| Support 2 | Support 1 | Pivot Point | Resistance 1 | Resistance 2 |
| 11771.01 | 11842.43 | 11916.60 | 11988.02 | 12062.19 |
Total Returns
Yesterday: 0.15% – Trailing 5 days: 3.08% – Trailing 30 days: 1.71%
Averages for current day based on past 10 years of data
- Current Day: 0.33% with 66.67% of sessions gaining
- Next 7 days: –0.86% with 45.50% of sessions gaining (Max return: 0.86% by September 2 on Average)
- Next 30 days: –2.55% with 46.03% of sessions gaining (Max return: 2.23% by September 15 on Average)
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