Stock Market Outlook for September 2, 2010
Upcoming Events for Today:
- Weekly Jobless Claims will be released at 8:30am. Market expects Initial Claims to reveal 475K versus 473K previous. Continuing Claims are expected to show 4435K versus 4456K previous.
- Second Quarter Productivity will be released at 8:30am. Market expects –1.7% versus –0.9% previous.
- Factory Orders for July will be released at 10:00am. Market expects an increase of 0.3% versus a decrease of 1.2% previous.
- Pending Home Sales for July will be released at 10:00am. Market expects a decline of 1.0% versus a decline of 2.6% previous.
The Markets
| Market | Close | % Change | Expected ST Low | Expected ST High |
| Dow Jones Industrial Average (^DJI) | 10,269.47 | 2.54% | 10,069.38 | 10,637.52 |
| Dow Jones Transportation Average (^DJT) | 4,283.41 | 3.90% | 4,120.60 | 4,475.35 |
| Dow Jones Utility Average (^DJU) | 397.36 | 2.16% | 379.11 | 393.87 |
| S&P 500 (^GSPC) | 1,080.29 | 2.95% | 1,055.45 | 1,121.55 |
| S&P/TSE Composite (^GSPTSE) | 12,003.78 | 0.75% | 11,564.70 | 11,877.93 |
| NASDAQ Composite (^IXIC) | 2,176.84 | 2.97% | 2,134.24 | 2,291.08 |
| Austrian Traded Index (^ATX) | 2,461.29 | 2.47% | 2,400.54 | 2,526.58 |
| French CAC 40 (^FCHI) | 3,623.84 | 3.81% | 3,488.42 | 3,743.03 |
| German DAX (^GDAXI) | 6,083.90 | 2.68% | 5,932.48 | 6,303.99 |
| UK FTSE 100 (^FTSE) | 5,366.40 | 2.70% | 5,172.10 | 5,374.30 |
| Swiss Market Index (^SSMI) | 6,332.40 | 2.45% | 6,147.95 | 6,360.47 |
| Brazilian IBOVESPA (^BVSP) | 67,073.00 | 2.96% | 64,912.94 | 68,035.31 |
| Mexico’s IPC (^MXX) | 32,339.23 | 2.08% | 31,528.74 | 32,846.49 |
| Amsterdam Exchange Index (^AEX) | 325.52 | 2.86% | 314.77 | 337.87 |
| New Zealand NZX 50 INDEX GROSS (^NZ50) | 3,077.10 | 1.35% | 3,002.67 | 3,049.59 |
| China HANG SENG INDEX (^HSI) | 20,623.83 | 0.43% | 20,603.89 | 21,555.52 |
| Korea KOSPI Composite Index (^KS11) | 1,764.69 | 1.26% | 1,735.52 | 1,784.09 |
| Tokyo NIKKEI 225 (^N225) | 8,927.02 | 1.17% | 8,940.18 | 9,652.87 |
September started off on a positive note on Wednesday as better than expected manufacturing numbers out of the US and China gave the markets a much needed boost. The improved manufacturing reports overshadowed any negative economic statements with regards to employment and construction, both of which came in lower than expectations. Markets had been waiting for this oversold bounce for sometime, having struggled to break free from this technical classification. However, one day of activity does not make a trend. Many analysts are already spouting that a bottom is in, confident that manufacturing will be the catalyst to bring about improvements to the other areas of the economy that continue to struggle, mainly employment and housing. These two items will once again be highlighted in economic reports to be released on Thursday morning, with the major employment report to come on Friday.
As had been reported for the last couple of days on this site, technical indicators are lining up for a “buy” signal. Up until yesterday the markets remained terribly oversold and a correction of this imbalance was certainly required. Wednesday’s market action cleared oversold indicators and moved indices towards overbought ground. The TSE Composite Index is one such index that has entered overbought territory, having revealed a technical buy signal just 5 sessions ago. Much of the move today across the majority of stocks and indices was achieved following the dissemination of the ISM Index at 10:00am with little movement thereafter as key resistance levels were tested. In order to confirm a breakout to the upside, technical levels tested in Wednesday’s session must be broken; But first, significant economic reports on Thursday and Friday must be contended with.
The put/call ratio on Wednesday revealed a bullish 0.82. This reading sits around the average lows for this ratio over the last few months and provides indication that put trading is no longer a dominant force for the time-being as the risk trade is once again embraced. It remains important, however, to maintain appropriate protective measures until the trend, whether it be up or down, is confirmed. The one day move on Wednesday was certainly welcomed, but an upside trend is certainly not in place. Economic news on Thursday and Friday has the potential to add volatility to this market that at present is putting a lot of emphasis on Manufacturing alone, a segment that accounts for only 11% of the overall economy. Before an upside trend can be considered sustainable, let’s first be certain that a bottom has been put in place with regards to unemployment and housing, something which remains illusive.
Sectors that Moved the Market
| Sector | % Price Change | % Volume Change |
| Energy Sector (XLE) | 3.73% | 8.75% |
| Basic Materials Sector (XLB) | 3.00% | 25.76% |
| Financial Sector (XLF) | 3.83% | 24.02% |
| Health Care Sector (XLV) | 2.31% | 18.15% |
| Consumer Discretionary Sector (XLY) | 3.44% | 11.96% |
| Industrials Sector (XLI) | 3.97% | 53.44% |
| Technology Sector (XLK) | 2.56% | -4.65% |
| Utilities Sector (XLU) | 2.17% | -7.68% |
| Consumer Staples Sector (XLP) | 1.77% | -22.33% |
Industrials led the market on the day as the sector received a strong boost from the manufacturing survey results, leading to demand for equities in this space. Across the board, gains were strong and technical indicators remain positive. Two sectors are showing overbought signals: materials and utilities. Should the strength in the market continue, expect positions in theses sectors to be pared back as safe haven plays are exchanged for riskier assets.
S&P 500 Index
Chart Courtesy of StockCharts.com
| Support 2 | Support 1 | Pivot Point | Resistance 1 | Resistance 2 |
| 1038.86 | 1059.57 | 1070.44 | 1091.15 | 1102.02 |
Total Returns
Yesterday: 2.95% – Trailing 5 days: 2.37% – Trailing 30 days: –4.05%
Averages for current day based on past 20 years of data
- Current Day: 0.27% with 36.36% of sessions gaining
- Next 7 days: 0.07% with 47.50% of sessions gaining (Max return: 0.98% by September 5 on Average)
- Next 30 days: –0.61% with 51.67% of sessions gaining (Max return: 2.46% by September 14 on Average)
TSE Composite
Chart Courtesy of StockCharts.com
| Support 2 | Support 1 | Pivot Point | Resistance 1 | Resistance 2 |
| 11876.19 | 11939.99 | 11978.02 | 12041.82 | 12079.85 |
Total Returns
Yesterday: 0.75% – Trailing 5 days: 3.05% – Trailing 30 days: 2.48%
Averages for current day based on past 20 years of data
- Current Day: –0.53% with 33.33% of sessions gaining
- Next 7 days: –1.34% with 40.50% of sessions gaining (Max return: 0.41% by September 4 on Average)
- Next 30 days: –2.77% with 45.77% of sessions gaining (Max return: 1.84% by September 15 on Average)
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