Stock Market Outlook for September 9, 2010
Upcoming Events for Today:
- Weekly Jobless Claims will be released at 8:30am. Market expects Initial Claims to come in at 470K versus 472K previous. Continuing Claims are expected to reveal 4445K versus 4456K previous.
- The Trade Balance for July will be released at 8:30am. Market expects -$47.3B versus -$49.9B previous.
The Markets
| Market | Close | % Change | Expected ST Low | Expected ST High |
| Dow Jones Industrial Average (^DJI) | 10,387.01 | 0.45% | 10,069.38 | 10,634.85 |
| Dow Jones Transportation Average (^DJT) | 4,400.40 | 1.36% | 4,120.60 | 4,470.77 |
| Dow Jones Utility Average (^DJU) | 395.82 | -0.41% | 379.39 | 396.27 |
| S&P 500 (^GSPC) | 1,098.87 | 0.64% | 1,055.45 | 1,121.03 |
| S&P/TSE Composite (^GSPTSE) | 12,042.26 | -0.49% | 11,582.12 | 12,034.32 |
| NASDAQ Composite (^IXIC) | 2,228.87 | 0.90% | 2,134.24 | 2,287.28 |
| Austrian Traded Index (^ATX) | 2,479.30 | 0.61% | 2,406.26 | 2,527.72 |
| French CAC 40 (^FCHI) | 3,677.21 | 0.92% | 3,488.42 | 3,744.91 |
| German DAX (^GDAXI) | 6,164.44 | 0.76% | 5,935.12 | 6,303.04 |
| UK FTSE 100 (^FTSE) | 5,429.70 | 0.40% | 5,176.69 | 5,403.74 |
| Swiss Market Index (^SSMI) | 6,387.00 | 0.42% | 6,153.11 | 6,384.34 |
| Brazilian IBOVESPA (^BVSP) | 66,407.00 | -0.51% | 64,954.51 | 68,035.31 |
| Mexico’s IPC (^MXX) | 32,409.60 | -0.12% | 31,528.74 | 32,804.14 |
| Amsterdam Exchange Index (^AEX) | 331.43 | 1.12% | 314.77 | 336.30 |
| New Zealand NZX 50 INDEX GROSS (^NZ50) | 3,161.18 | -0.41% | 3,010.79 | 3,117.28 |
| China HANG SENG INDEX (^HSI) | 21,088.86 | -1.46% | 20,638.80 | 21,552.62 |
| Korea KOSPI Composite Index (^KS11) | 1,779.22 | -0.48% | 1,736.79 | 1,787.39 |
| Tokyo NIKKEI 225 (^N225) | 9,024.60 | -2.18% | 8,925.93 | 9,633.81 |
Minor Gains on Wednesday – reason to be optimistic or fearful? Wednesday saw major indices in the US post moderate gains after a Portuguese debt auction attracted demand from investors looking for yield. The bids in excess of 2.6 times the amount offered was a considerable improvement over the 1.6 times witnessed in a March auction. But investors became jittery just prior to and during the release of the Fed’s Beige Book, which showed rapid deceleration of economic growth. Following this report, indices attempted a run for the highs of the day, but failed to do so and weakened in the last hour of trading. Indices are once again finding resistance at or near the 200-day moving average and with overbought signals continuing to exaggerate, market strength is beginning to fade. Volumes again were light on the day and it is becoming increasingly obvious that investors are unwilling to stick their neck out for the time-being.
Remember the Mid-Term Election Year Chart (available via the Seasonal Chart Database at http://charts.equityclock.com/) that Tech Talk frequently profiles, September 8th is noted to be the September peak, on average, during this period in the presidential cycle. I must note that I do not advise using the charts to this detail by focusing on the daily points, but I did find this rather interesting. The overall trend for the present month is to the downside. A sell signal amongst technical indicators has yet to be recorded, however. Considering the overbought nature of many sectors and markets, a pullback may be imminent. However, the Mid-Term Election Chart should not be feared as it offers something for everyone. For the Bears, tendencies from here into October reveal a downward trend to conclude the third quarter. For the Bulls, the chart reveals levels by year-end well above present values. For those that believe the market is overly pessimistic, that’s good as we will soon be looking for investments with value as soon as a buy signal is revealed, hopefully sometime in October. And if there are any that believe that investors are too optimistic, please send some of that optimism my way as the girlfriend thinks I am too negative.
For now investors must remain hedged for any downside potential through the present month, and as indicated by the present level of the put/call ratio, it appears that is exactly what investors are doing by keeping emphasis on trading activity in puts. The put/call ratio on Wednesday of 0.94 was enough to keep the 10-day moving average of this ratio relatively high and indicates a clear tendency of traders to seek safety in put option strategies as long positions continue to be held following the gains over the past 6 sessions. Should the market weaken to any significant degree from present levels, expect these long positions to be liquidated.
Sectors that Moved the Market
| Sector | % Price Change | % Volume Change |
| Energy Sector (XLE) | 0.86% | -18.43% |
| Basic Materials Sector (XLB) | 0.77% | -17.64% |
| Financial Sector (XLF) | 0.99% | -8.86% |
| Health Care Sector (XLV) | 0.55% | 73.26% |
| Consumer Discretionary Sector (XLY) | 0.72% | -13.81% |
| Industrials Sector (XLI) | 1.04% | -14.01% |
| Technology Sector (XLK) | 0.56% | 18.51% |
| Utilities Sector (XLU) | -0.48% | -0.69% |
| Consumer Staples Sector (XLP) | 0.44% | -10.72% |
Utilities faltered on the day as natural gas moved lower on predictions of mild weather and ample supplies over the near future. Technical indicators are setting up to confirm a signal to sell within the sector. Equities in this space top between now and October, and with a sell signal apparently looming, an exit point at present levels appears reasonable in selective names. Industrials was the leading sector on the day as stocks poised to benefit from President Obama’s economic proposals received a boost.
S&P 500 Index
Chart Courtesy of StockCharts.com
| Support 2 | Support 1 | Pivot Point | Resistance 1 | Resistance 2 |
| 1087.26 | 1093.07 | 1098.16 | 1103.97 | 1109.06 |
Total Returns
Yesterday: 0.64% – Trailing 5 days: 1.72% – Trailing 30 days: –2.56%
Averages for current day based on past 20 years of data
- Current Day: –0.14% with 64.29% of sessions gaining
- Next 7 days: 0.01% with 61.00% of sessions gaining (Max return: 1.02% by September 11 on Average)
- Next 30 days: –1.60% with 50.47% of sessions gaining (Max return: 2.27% by September 20 on Average)
TSE Composite
Chart Courtesy of StockCharts.com
| Support 2 | Support 1 | Pivot Point | Resistance 1 | Resistance 2 |
| 11960.51 | 12001.39 | 12081.04 | 12121.92 | 12201.57 |
Total Returns
Yesterday: –0.49% – Trailing 5 days: 0.32% – Trailing 30 days: 1.51%
Averages for current day based on past 10 years of data
- Current Day: –0.51% with 50.00% of sessions gaining
- Next 7 days: –0.16% with 52.00% of sessions gaining (Max return: 1.37% by September 12 on Average)
- Next 30 days: –3.12% with 47.32% of sessions gaining (Max return: 2.44% by September 21 on Average)
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