By Nicholas Santiago on July 2nd, 2010 10:57am Eastern Time
Since June 21st the markets have struggled, dropping about 10 percent. The prior week the markets rallied into options expiration week. This was not a surprise as the institutional money will rarely let the small retail options trader collect into expiration. Just think how many people, mainly small retail traders bought puts on the market in early June. In any case these markets are now on very shaky ground. Many traders and investors are pricing in Armageddon at this time; regardless if this should occur, the transport index holds some important clues. Today the transports are trading lower by 44.00 points even as the major indexes are basically flat. Many traders and investors are waiting to see if the transports will take out and close below the June 8th pivot low. Some traders and investors have already stated that a Dow Theory Sell signal has already triggered. However, the transports never closed below the June 8th pivot low at 3983. Should the market close below this point it would likely create a new flood of bearish investors.
This morning FedEx Corp (NYSE:FDX) is trading lower by 0.46 to $71.55. FedEx Corp is a leading global air and ground shipping company. This stock bounced off the important $70.00 support level. Should FedEx Corp break this level the stock could find support around the $66.00 area.
Norfolk Southern Corp (NYSE:NSC) is a leading railroad stock that is trading lower by 0.81 to $51.90. The stock will have some minor daily support soon around the $51.50 area. Should that level fail to hold then the $50.00 level will be the next support area.
Delta Airlines Inc (NYSE:DAL) is trading lower by 0.27 to $11.45. The stock actually has minor support at the current price. Should the stock decline the $11.00 is a very important support level. Should that level fail to hold it could trigger a bearish 'head and shoulders' top pattern. This level must be watched extremely closely.
Right now the transport sector is very important to follow. Many traders and investors will use the transport sector as a lead dance partner. Remember, when the transport sector declines it is a sign of contraction in the economy. If the transport sector bounces or trades higher the market will and should live to fight another day in a very weak economy.
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US JUNE NONFARM PAYROLLS -125K from +433K, Unemp. rate DROPS to 9.5% from 9.7% (vs exp 9.8%), Average Weekly Hours flat at 33.4. Euro continues to rally across the board, eyeing the $1.2660 target (prev IMT), while JPY rebounds to gain versus all currencies (except EUR). USDCAD looks to retest 1.0680 as oil drops below 72.00. 10-yr bond yields unmoved at 2.93%, but a decline below 2.89% will likely see EURUSD regain 1.2630 and 1.2660. STOCK FUTURES UNCERTAIN where to go due to mixed US data. Dow futures rallied to +60 pts before losing all of those gains. Now +8 pts. MARKET CHOPPINESS WILL GROW WORSE into mid morninbg US trading as US approaches long weekend and attention shifts to World Cup Match Brazil-Holland at 14:00 GMT
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YEN IS THE DAYs WORST PERFORMER, closely followed by the tumbling USD as the combination of stabilization in Asian/European equities and onslaught of negative US data weigh on both currencies. Markets await US June non-farm payrolls expected to decline by 125K(estimates range from -200K to flat). Since census workers are expected to have shown a net loss of about 230k, PRIVATE PAYROLLS are expected to have risen by 105K. June unemployment rate seen at 9.8% from 9.7%. A disappointing number is likely to maintain the sell-off in the USD because the intensity of negative US figures has occurred simultaneously with stabilizing dynamics in the Eurozone. The break above 1.2480 in EURUSD will likely give way to an initial target of $1.2660.
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THE UNUSUAL SIMULTANEOUS selloff in the US dollar and stocks seems to be in function of tumbling US bond yields as US data continues to disappoint throughout the day. The broad weakness in manufacturing ISM (including the 20-point tumble in the prices paid index to Nov lows), the unexpected 13K rise in jobless claims to 472K, the 30% plunge in May pending home sales, cannot be positive for yields. All these figures are helping to drive 10-yr yields to fresh 3-month lows below 2.90%. The ongoing tumble in yields is unlikely to spare the greenback in the event of a negative surprise in US jobs figures. EURUSD capped at 1.2480, USDJPY eyes 86.80 target, followed by 86.20 in event of Friday NFP selloff. WATCH ASHRAF ON CNBC TODAY 12:25 pm EDT (16:25 PM GMT)
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E$ short order @ 1.2223 sl @ 1.2315 - 1st target 1.2150, 2nd 1.2050 ish(previous hook, and 138.2 fib extension). H4 inside pin is my trigger barH4 trend down - daily mixed to down I think. Price failed to close above intraday level at 1.2270, and failed at 61.8% fib.1.2150 is a key level on the daily in recent times, so will have to keep a close eye on PA at that level.Lets see how it works out. Good trading :)
