1. Friday’s monthly US jobs reports and preceding events that provide clues on their results
2. Euro-zone, UK, and China PMI reports
3. Central bank rate statements and commentary from the Euro-zone and Australia
4. Weak technical picture for the bellwether S&P 500 combined with more lackluster US data suggests a higher chance of downside moves this week, though within ranges of the prior 2 months
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GBP GAINS across the board, completing the 7th rising week out of the last 8 weeks in a week when the Bank of Englands mixed messages regarding inflation became apparent to the public. Contrary to the rest of the G5, UKs inflation remains well above target, thereby fuelling expectations of a rate hike, which in contrast to Fed emerging rhetoric hinting at prolonged QE. A break above $1.57, to call up $1. 574055-day MA, followed by $1.5870. EURGBP nears the 0.83 support50% retracement of the 0.8070-0.8530 rally. While stocks hover in and out of negative territory, FX is gradually moving against the US dollar after the 2.4% Q2 GDP, which is considered to be sufficiently positive for currencies to drag down the talked-down USD following Bullards dovish comments.
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By Nicholas Santiago on July 30th, 2010 11:01am Eastern Time
Many traders and investors may have realized by now that the major stock market indexes often get supported or defended into the weekend. We call this phenomenon the 'Friday effect'. If you have looked at a chart over the last two years most Friday's before a weekend are basically a flat to slightly positive trading day. There have been a few rare times when the major indexes have sold off sharply on a Friday, however, the key word is rare. Today the SPDR Dow Jones Industrial Average ETF (NYSE:DIA), and the Powershares QQQ Trust (NASDAQ:QQQQ) both started the session sharply lower and are now trading slightly positive on the session.
Today the stock market started the session sharply lower after a weaker than expected GDP report was released by the Commerce Department. However, after the morning gap lower open the market has surged higher. It is also important to note that the U.S. Dollar Index has also declines sharply from the opening bell at the New York Stock Exchange. When the dollar declines the major stock indexes will usually inflate higher.
Please remember that the volume is usually very light on a Friday. Therefore, after the first couple hours the volume will usually get very light and the market often goes into a sideways float throughout the rest of the day. Many professional traders and investors will generally leave early on a Friday to get a head start on the weekend in the summertime. Therefore, it is prudent to expect less volatility throughout the rest of the session. In any case it looks as if the 'Friday effect' has played out again as the market are now flat to slightly higher on the session.
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By Gareth Soloway on July 30th, 2010 12:03pm Eastern Time
The big earnings announcements have subsided over the last week, but the economic reports continue to flow. Today, GDP was reported for the second quarter, 2010. It came in around the estimates at 2.4%. The futures sold sharply. Why did the futures sell sharply on a GPD number that came in line with what Wall Street had expected? Because GDP for the first quarter of 2010 was revised upward to 3.7% from 2.7%. What? How does that make sense? GPD being revised upwards is good news right? Not so fast. GDP of 3.7% in the first quarter, compared to GDP of 2.4% in the second quarter means now there is a significant slowdown in progress again. This leads many to think that double dip recession is in play.
The markets gapped lower with the SPDR S&P 500 ETF (NYSE:SPY) hitting $108.98 within the first few minutes of trading. This was a drop of $1.31 for the day. The Dow Jones Industrial Average was down more than 100 points.
Then came more economic data. At 9:45am ET, Chicago PMI was reported to be 62.3. Analysts had expected a much lower number. That markets surged higher. In addition, word came out that BP plc (ADR) (NYSE:BP) would set aside $100 million unemployed rig workers. That helped fuel a short squeeze. At 9:55am ET, University of Michigan Sentiment was reported to be 67.8, also higher than economists had expected. The markets continued to squeeze.
By 11:00am ET, the markets had erased a 100+ point drop on the DOW and were in positive territory. Truly an amazing move as shorts were caught off guard once again. In the last hour, the markets had stalled and are now beginning their sideways trek around the flat line. This is now looking like a typical Friday mid day session with many traders starting to head out for the weekend. Volume should continue to decline and a flat day is expected on the markets.
Gareth Soloway
Chief Market Strategist
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By Gareth Soloway on July 30th, 2010 3:56pm Eastern Time
The SPDR S&P 500 ETF (NYSE:SPY) hit a new high of the day, coming into the 200 moving average and the double top resistance from yesterday afternoon. Note the chart below. It is pulling off those levels just before the close with the markets in the green. The dollar has moved lower throughout the day, helping the markets regain their composure. Oil turned a big drop into a nice move higher along with natural gas. Natural gas continues to look like a breakout on the daily United States Natural Gas Fund, LP (NYSE:UNG) chart. Gold is substantially higher as well.
After an ugly gap lower today, the markets have given an impressive showing. The Dow Jones Industrial Average was down over 100 points this morning. It is now up 15.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.comRead more…
The large drop in the August contract open interest (61,257) is to be expected since this is 'roll week' and those who are not standing for delivery will have to close their positions by Thursday night.The new positions or 'rolls' into the October and December contracts totaled 40,372.Recall that this was also an option expiration week.Overall there was a net loss of 21,894 contracts.It is too soon to tell if this was a capitulation that blew out the weak hands, but it looks as though it might have been one. The momentum traders will likely stand on the sidelines until gold can clear 1180, which was prior support. Traders have their eyes on the 200 DMA which is around 1145.http://jessescrossroadscafe.blogspot.com/2010/07/big-drop-in-comex-gold-open-interest.htmlRead more…
By Gareth Soloway on July 29th, 2010 12:27pm Eastern Time
This is why trend line analysis gets me excited! Take a look at the break down yesterday on the SPDR S&P 500 ETF (NYSE:SPY) through the green trend line and the move lower. Then note in the chart below how the markets gapped higher into that same break down trend line. At that exact price point, the markets fell and have now turned into a major down day in the markets. Understand the levels and profit. It is that simple. Join the Research Center and Intra Day Stock Chat!
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.comRead more…
S&P500 barely closed above its 200-day MA on Tuesday before falling Wednesday and Today. Daily stochastics show a double top, which in effect can be seen as bearish divergence. Fridays release of US Q2 GDP is expected +2.5% from 2.7% in Q1, but several economists allowing for an undershoot of 2.0%. Whether a disappointing figure would be USD negative will not only depend on the performance of equities, but also on the German-US 10 year yield differential, whose technicals indicate prolonged gains in favour of Germany (EUR). Also of significance is the technical significance of $1.3125-30 in EURUSD, which is presented by the 38% retracement of the euros decline from the Nov highs to the June lows, as well as the resistance on the reverse H&S formation.
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USD DROPS ACROSS THE BOARD on a combination of cautious remarks from Moodys about the US credit rating and persistent improvement in the Eurozone consumer sentiment. Although Asian equities finished around neutral territory, markets are decidedly USD-negative. AUD stabilized at 0.89 before rallying over a full cent, eyeing interim resistance at 0.9075. GBPAUD and EURAUD hourly stochastics showing deterioration but daily charts remain bullish. EURUSD continues to eye the 1.3130 target, while USDCAD is increasingly confined to a symmetrical wedge between 1.0275 and 1.0440. RBNZs rate hike proved rather dovish, with the policy statement using words such as deteriorated and subdued regarding future growth and indicating NZD strength to be inconsistent with the growth outlook.
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By Nicholas Santiago on July 28th, 2010 3:18pm Eastern Time
Today the market is pulling back a little and has really been under pressure since the open. Many traders and investors are under the impression that the market weakness is because of the weak stocks such as Google Inc(NASDAQ:GOOG), and Amazon Com Inc (NASDAQ:AMZN), and Baidu Inc (NASDAQ:BIDU). However, it appears there is something bigger and more important at work today and it is the U.S. Dollar Index.
Today the U.S. Dollar index has rallied throughout the trading day. At 10:00 am EST the dollar traded as low as $81.95 and now it is trading at $$82.19. While this may not seem like a major move higher in the dollar it does carry a lot of weight in the currency world. Simply put when the dollar rallies the stock market indexes deflate. The opposite is true when the dollar declines the market indexes inflate. The U.S. Dollar is the real driving force behind every market move.
If you look at a weekly dollar chart you will see a major dollar decline in 2009 when the stock market rallied higher for most of the year. In 2010 the dollar has rallied higher into early June 2010. It is important to note that the major market indexes have been under pressure for most of the year. Sometimes the stock market does not react tick for tick inversely to the dollar, however, often it will.
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