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FirstAlert(tm) Daily 8/5: Market Recovers From Rough Start

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August 5, 2009 (FinancialWire) (By Dr. Joe Duarte) — The S&P 500 (SPX) finally hit 1000 and the S&P SPDR ETF (NYSE: SPY) hit 100, both critically acclaimed round numbers. Now traders have to decide whether they’ve made enough money or whether they go for more. More important is the timing, as the Dog Days of August approach, and the seasonally bullish “turn of the month” trading period winds down.

Yet, when you add the fact that the employment report is due out on Friday, you have the potential for some choppy trading ahead.

Stock index futures were pointing to a lower opening on Wall Street, as profit taking hit Asia some, and Europe more forcefully, both signs that traders may want to pack it in for the summer. Still, by the end of the day, late buyers came into the market, a sign that mutual funds are still nibbling at stocks.

The S&P 500 is up over 50% from the March bottom at the close of trading on August 4th. That’s enough for nearly two and a half bull markets if you use the 20% benchmark to measure such a move. And that has come in about four months. That means that the market is ripe for a correction of some sort. But, so far, there is no sign of a loss of interest in stocks, as buyers continue to come in on dips.

When the S&P 500 reaches big marquee numbers such as 1000, you have to expect some sort of pullback, contraction, or sideways movement. What we need to keep an eye on are support levels, such as the 20 50 and 200 day moving averages. Thus the 929 (20-day) and 957 (50-day) areas are important. On the resistance side, 1000-1011 is an important resistance band, within which the market closed on 8-3.

Market breadth is another important measure of where things stand. And a look at the New York Stock Exchange Advance Decline Line on a daily basis shows a nice improvement since the market bottomed in March. There is no sign of weakness here, which is a positive for the market in the intermediate term, measured in weeks to month. Yet, if you look at the market’s momentum over the longer term by examining the New York Stock Exchange High-Low index on a weekly basis, you can see that the current rally has barely made a dent in the damage done by the bear market that started in 2007. This is a sobering picture, which suggests that the market has a long way to go before it can recover to a point where you can start to consider multi-year advances such as the ones we grew accustomed to in the 1990s and early 2000s.

Finally, if you look at the traditional leadership of the market, technology stocks, such as in the Semiconductor Index (SOX) and the Bank Index (BKX), both have made a bottom, but they have a long way to go before they can be considered to be in major momentum runs. Those are issues that can be positive or negative, depending on your investment style and your time frame. Nevertheless, right now, it’s a tough call.

Thus, as you trade, consider this: The stock market has come a long way in a very short period of time. The S&P 500 is now at one of those round numbers–1000–that makes traders nervous. The employment report is out Friday, and there is still a lot of angst in Congress about health care reform and other legislative agenda items.

Even as Congress heads out to summer recess and Wall Street heads for the Dog Days, the market can still deliver some surprises. We expect some short-term turbulence ahead. It’s a good opportunity to look at all positions carefully, to consider taking some profits, and maybe raise some cash.

The FirstAlert(tm) Economics Calendar lists ADP Employment for July (8:15 a.m.), Treasury Refunding Announcement (9 a.m.), Factory Orders for June (10 a.m.), ISM Services Index for July (10 a.m.), EIA Petroleum Inventories (10:30 a.m.).

The FirstAlert(tm) Events Calendar showcases OSIP, CELG, AET, COV, UNH, UTHR at BMO Capital Markets Focus on Healthcare Conference.

FirstAlert(tm) “Money Index” is an indicator of the depth of market direction or indirection. While not always including the same stocks, the NYSE/NASDAQ/AMEX 25 Most Actives and NYSE/NASDAQ/AMEX greatest Percentage Losers and Percentage Winners (weighted against pure monetary loss/gain) indicate the direction in which the mass of money is flowing, as well as the general focus of the market. Of the Most Actives, last session’s trading showed 18 advancers versus 7 decliners. Volume leaders were led by Citigroup, Inc. (NYSE: C) trading 112,918,800 shares closing at $3.25 (up 2.2%), Bank of America Corporation (NYSE: BAC) trading 43,024,900 shares closing at $15.64 (up 2.1%) and the SPDR Trust ETF (NYSE: SPY) trading 38,962,231 shares closing at $100.7 (up 0.3%).

Of last session’s Greatest Percentage Losers, stocks taking the greatest monetary losses were led by PPL Corporation (NYSE: PPL) trading on volume of 2,433,700 shares (losing $1,681.7 million), Herbalife Ltd. (NYSE: HLF) trading on volume of 692,800 shares (losing $275.1 million) and ProShares UltraShort Real Estate (NYSE: SRS) trading on volume of 6,765,379 shares (losing $93.1 million).

Of last session’s Greatest Percentage Winners, stocks making the greatest monetary gains were led by YRC Worldwide Inc. (NASDAQ: YRCW) trading on volume of 2,356,769 shares (gaining $27.3 million), Wuhan General Group China Inc. (NASDAQ: WUHN) trading on volume of 135,044 shares (gaining $27.1 million) and Bionovo Inc. (NASDAQ: BNVI) trading on volume of 1,203,619 shares (gaining $13.7 million).

The statistical source for deriving each day’s The FirstAlert(tm) Money Index is StockSmart.com (http://www.stocksmart.com/ri/mostactive.staticdoc).

FirstAlert(tm) Website of the Day: http://www.teslamotors.com

Quote of the Day: “If you disregard the very simplest cases, there is in all of mathematics not a single infinite series whose sum has been rigorously determined. In other words, the most important parts of mathematics stand without a foundation.” Niels H. Abel

Today is: National Night Out, Coast Guard DAy.

Happy Birthday: Niels H. Abel, Guy de Maupassant, Joseph Merrick, Naum Gabo, John Huston, Robert Taylor, Neil Armstrong, John Saxon, Loni Anderson, Rick Derringer, Maureen McCormick, Patrick Ewing, Jonathan Silverman, LoLo Jones, Paula Creamer.

Today in History: William Wallace, who led Scottish resistance to England, was captured in 1305 by the English near Glasgow and transported to London for trial and execution. Sir Humphrey Gilbert established the first English colony in North America in 1583, at what is now St John’s, Newfoundland. Tecumseh’s Indian force ambushed Thomas Van Horne’s 200 Americans at Brownstone Creek in 1812, causing them to flee and retreat. The United States Army abolished flogging in 1861. Standard Oil of New Jersey was established in 1882. The cornerstone for the Statue of Liberty was laid on Bedloe’s Island in New York Harbor in 1884. American Bandstand, a show dedicated to the teenage “baby-boomers” by playing the songs and showing popular dances of the time, debuted in 1957 on the ABC television network. Ronald Reagan fired 11,359 striking air-traffic controllers who ignored his order for them to return to work in 1981.

[FirstAlert(tm) was created by Gayle Essary, founder of Investrend Communications, Inc., parent of Investrend Information. The opinions expressed in FirstAlert(tm) do not necessarily reflect the opinions of Investrend.]

FinancialWire(tm) is a fully independent, proprietary news wire service. FinancialWire(tm) is not a press release service, and receives no compensation for its news, opinions or distributions. Further disclosure is at the FinancialWire(tm) web site (http://www.financialwire.net/disclosures.php). Contact FinancialWire(tm) directly via inquiries@financialwire.net.

Free annual reports for companies mentioned in the news are available through the Free Annual Reports Service (http://investrend.ar.wilink.com/?level=279).

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