Tuesday, July 31, 2007
The S&P500 Index is at a long term support level which could provide support for a strong bounce higher. The 200 day moving average for the S&P500 Index is also just below current trading which also suggests potential support for a bounce higher.
Fundamentals will ultimately lead price trend development. One key issue is the potential de-leveraging that could occur due to the build up of leverage in recent years. Due to sharp declines in liquidity in high yield bond markets, traders are concerned about the pace and ability to conclude leveraged buyouts. Traders are also concerned about re-pricing in the high yield bond market which may lead to a need for some companies to sell off other more solid assets to ensure financial health.
In the short term, if we see news that helps to stabilize fears about the size or degree of the liquidity problem, we may see a short term recovery in stocks. 0 Comments
Fundamentals will ultimately lead price trend development. One key issue is the potential de-leveraging that could occur due to the build up of leverage in recent years. Due to sharp declines in liquidity in high yield bond markets, traders are concerned about the pace and ability to conclude leveraged buyouts. Traders are also concerned about re-pricing in the high yield bond market which may lead to a need for some companies to sell off other more solid assets to ensure financial health.
In the short term, if we see news that helps to stabilize fears about the size or degree of the liquidity problem, we may see a short term recovery in stocks. 0 Comments
Monday, July 30, 2007
Another day of sharp declines for major U.S. indices with a large portion of selling pressure coming in the late afternoon session. Despite losses on the day, trading occurred for the most part within yesterday's trading range for the Russell 2000 and Nasdaq Composite. The Dow Jones Industrials and S&P500 Index, however, closed well below yesterday's low. The continuation of sell pressure is a warning to traders that the fundamentals behind current deterioration in stock prices may more significant that many realize. If we continue to see selling pressure on Monday, it could point to significant downside yet to come. Stabilization on Monday could leed to a short term recovery of the recent sell-off.
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Friday, July 27, 2007
Investors reacted today to systemic risk from a credit and housing crunch. Reassessing risks in credit markets promoted selling pressure in stocks that have been supported by strong merger and acquisition activity, excess liquidity and positive earnings. With a reduction of liquidity in high yield bond markets, we are seeing a re-pricing of high yield bonds as a spill over from problems in sub-prime mortgage markets. There is concern that the full extent of liquidity problems in high yield bond markets is not yet fully known. A number of leveraged buy outs may be in trouble due to a reduced ability to float new high yield bond issues.
Financial companies are under sell pressure due in part to tightening lending standards, sub-prime mortgage issues and potential spillover as well as the view that takeover activity, which as been at a record pace, has hit a peak, and will now decline.
The U.S. dollar was weaker against the yen in trading today on concerns about credit markets globally as traders moved to unwind the "carry trade". U.S. Treasury yields fell on a "flight to quality" move into bonds. June New Home Sales data released this morning was much weaker than expected with downward revisions delivered for May and April as well. New home inventory is at 7.8 months. Yesterday's existing home sales report was also weak with inventory at 8.8 months. This suggests that housing will remain weak for some time. 0 Comments
Financial companies are under sell pressure due in part to tightening lending standards, sub-prime mortgage issues and potential spillover as well as the view that takeover activity, which as been at a record pace, has hit a peak, and will now decline.
The U.S. dollar was weaker against the yen in trading today on concerns about credit markets globally as traders moved to unwind the "carry trade". U.S. Treasury yields fell on a "flight to quality" move into bonds. June New Home Sales data released this morning was much weaker than expected with downward revisions delivered for May and April as well. New home inventory is at 7.8 months. Yesterday's existing home sales report was also weak with inventory at 8.8 months. This suggests that housing will remain weak for some time. 0 Comments
Thursday, July 26, 2007
Tomorrow is setting up as a potential reversal point for major U.S. indices. The short term trend is expected to rise. Major U.S. stock indices have been volatile in recent trading. The push higher in the U.S. dollar index today suggests the potential for a floor or near term support for the U.S. dollar. This is a positive for stocks, especially in light of uncertain times in the high yield bond sector and the bond market overall. Stability or strength in the U.S. dollar in near term trading suggests the potential for gains in U.S. stocks as a recovery of some of the risk reduction that has been ongoing over the last week.
Traders should remain cautious however, due to high whipsaw risks attributed to the large number of potential catalysts currently at play in financial markets. As we saw in trading over the last week, a falling trend segment can be made up of large moves in both directions. In addition to earnings news, bond yields, and the U.S. dollar, financial sector news is on watch to help define impact of re-pricing and liquidity loss in high yield bond markets. Economic data on watch includes New Home Sales tomorrow and advance numbers for second quarter GDP on Friday morning. 0 Comments
Traders should remain cautious however, due to high whipsaw risks attributed to the large number of potential catalysts currently at play in financial markets. As we saw in trading over the last week, a falling trend segment can be made up of large moves in both directions. In addition to earnings news, bond yields, and the U.S. dollar, financial sector news is on watch to help define impact of re-pricing and liquidity loss in high yield bond markets. Economic data on watch includes New Home Sales tomorrow and advance numbers for second quarter GDP on Friday morning. 0 Comments
Wednesday, July 25, 2007
Major U.S. indices fell sharply today on concerns that the sub-prime mortgage market weakness is spilling over into the prime market. Bill Gross, the manager of the world's largest bond fund said that problems afflicting the subprime market are spreading to junk bonds. This may suggest the potential for a liquidity crisis in the high yield bond sector, which could significantly impact on new deals and on the banking sector.
Country Wide financial reported today a sharp decline in profits due in part to a higher than expected number of defaults of prime mortgage market loans.
In watching bias in trading today. The S&P500 Index fell below its short term trendline level in the first five minutes of trading this morning. This was an indication of bearish bias. Selling pressure increased in afternoon trading, pushing the S&P500 Index down 29 points to 1512. 0 Comments
Country Wide financial reported today a sharp decline in profits due in part to a higher than expected number of defaults of prime mortgage market loans.
In watching bias in trading today. The S&P500 Index fell below its short term trendline level in the first five minutes of trading this morning. This was an indication of bearish bias. Selling pressure increased in afternoon trading, pushing the S&P500 Index down 29 points to 1512. 0 Comments
Tuesday, July 24, 2007
The S&P500 Index remains below the previous trading range. Whipsaw risks remain high, supporting caution. Potential catalysts include earnings, sub-prime mortgage market issues, crude oil prices, weekly retail sales (due to a focus on consumer spending), and merger and acquisition news.
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Friday, July 20, 2007
The US markets are currently in a narrow trading range consolidating there recent move to new highs. The five day trading range is on watch for trading tomorrow. Breaking outside of the range favors a view that price will continue in the direction of the break.
Although earnings appear to be largely positive, there is some concern about a recent bout of debt downgrades related to sub-prime mortgage market deterioration. Recent Fed comments suggest that the Fed believe that the subprime market problems may be larger than originally expected and could lead to a negative impact on consumer spending. Whipsaw risks are high, supporting caution for short term traders. 0 Comments
Although earnings appear to be largely positive, there is some concern about a recent bout of debt downgrades related to sub-prime mortgage market deterioration. Recent Fed comments suggest that the Fed believe that the subprime market problems may be larger than originally expected and could lead to a negative impact on consumer spending. Whipsaw risks are high, supporting caution for short term traders. 0 Comments
Wednesday, July 18, 2007
We should see some strong selling today as the DOW managed to hit its 140000 target and was sold off late into the trading session.
DOWN DAY
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DOWN DAY
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The Major U.S. indices consolidated in trading today but continued to show bullish dominance. Intel reported Earnings after the bell, beating expectations, with net earnings up 44% from a year ago quarter. However, Yahoo reported a decline in profit to $161 million for the quarter, down about $4 million from a year ago quarter. Merrill Lynch reported profit rose by 31% in the second quarter on strength in trading and investment banking.
Today’s market action could help to determine the near term trend as we have important CPI Data out 8:30 ET which will certainly get the attention of traders. Federal Reserve President Ben Bernanke is also speaking and I can’t see how his testimony will be encouraging for the bulls with the housing problem and potential need for higher interest rates………..so expect some volatility today.
Traders Blog – Thursday 19 July 2007
The S&P500 Index broke below the three day trading range in the first five minutes this morning. The index briefly moved back above the lower border of the three day trading range for about a half hour this morning and then fell back and stayed below the lower border until the final minutes of the day on late day buying.
Weakness in equity markets today was influenced by weakness in the U.S. dollar and comments from Federal Reserve Chairman Ben Bernanke about the potential for greater than expected weakness in the housing market and a negative spillover effect on consumer spending trends.
The Federal Reserve Chairman noted that the Fed's central focus remains inflation due to high energy costs, a high level of resource utilization and potential upward price pressures on commodities due to strong global growth trends.
The consumer price index for June was largely in line with expectations with both the core and headline number up 0.2% from May. Housing Starts in June were slightly better than expectations but are down almost 20% from year ago levels.
The U.S. dollar hit an all time low against the euro and a 26 year low against the British pound today. The FOMC minutes and the second showing of the Fed semi-annual monetary policy testimony will be a focus in trading tomorrow. 0 Comments
Today’s market action could help to determine the near term trend as we have important CPI Data out 8:30 ET which will certainly get the attention of traders. Federal Reserve President Ben Bernanke is also speaking and I can’t see how his testimony will be encouraging for the bulls with the housing problem and potential need for higher interest rates………..so expect some volatility today.
Traders Blog – Thursday 19 July 2007
The S&P500 Index broke below the three day trading range in the first five minutes this morning. The index briefly moved back above the lower border of the three day trading range for about a half hour this morning and then fell back and stayed below the lower border until the final minutes of the day on late day buying.
Weakness in equity markets today was influenced by weakness in the U.S. dollar and comments from Federal Reserve Chairman Ben Bernanke about the potential for greater than expected weakness in the housing market and a negative spillover effect on consumer spending trends.
The Federal Reserve Chairman noted that the Fed's central focus remains inflation due to high energy costs, a high level of resource utilization and potential upward price pressures on commodities due to strong global growth trends.
The consumer price index for June was largely in line with expectations with both the core and headline number up 0.2% from May. Housing Starts in June were slightly better than expectations but are down almost 20% from year ago levels.
The U.S. dollar hit an all time low against the euro and a 26 year low against the British pound today. The FOMC minutes and the second showing of the Fed semi-annual monetary policy testimony will be a focus in trading tomorrow. 0 Comments
Tuesday, July 17, 2007
We are currently in a trading range between 1558 and 1544 however we should see a breakout as we have plenty of news and earnings to be released. Earnings on watch tomorrow include CSX Corporation, Datalink Corp, First Place Financial, Forest Laboratories, Integra Bank Corporation, Intel, Johnson & Johnson, Key Corp, Merrill Lynch, Novartis Corporation, Polaris Industries, S&T Bancorp, State Street, Coca-Cola, Wells Fargo, West Coast Bancorp and Yahoo.
The U.S. dollar and Treasury yields could also be potential movers tomorrow. A rise in the dollar could lead to a consolidation in stock indices. There are a slew of economic reports out tomorrow including The Producer Price Index expected tomorrow at 8:30 a.m. ET and the Industrial Production numbers expected at 9:15 a.m. ET. Another potential catalyst tomorrow include a speech from Kansas City Federal Reserve Bank President Thomas Hoenig expected at 1 p.m. ET and will focus on monetary policy and U.S. economic outlook.
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The U.S. dollar and Treasury yields could also be potential movers tomorrow. A rise in the dollar could lead to a consolidation in stock indices. There are a slew of economic reports out tomorrow including The Producer Price Index expected tomorrow at 8:30 a.m. ET and the Industrial Production numbers expected at 9:15 a.m. ET. Another potential catalyst tomorrow include a speech from Kansas City Federal Reserve Bank President Thomas Hoenig expected at 1 p.m. ET and will focus on monetary policy and U.S. economic outlook.
Monday, July 16, 2007
Following a very strong week for the market’s across all Indexes, where the Dow had it’s largest one day gain in more than 4 years. This has left the market in an over-brought position and primed for a short term pullback.
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Monday is shaping up to be a potential short term reversal. The last couple of trading sessions have been strong with money flowing into stocks as traders position for positive growth and a more favorable outlook on interest rates. Over, markets are starting to look a little overbrought and a pullback is highly probable. There is a growing belief on the street that Earnings will be positive overall and should beat analyst expectations on the whole. Company to report Earnings on Monday include Mattel, Novellus Systems, Royal Philips Electronics, Stanley Furniture and W.W. Grainger, Eaton, Lakeland Financial, Macatawa Bank Corporation.
Traders will be focusing also on the U.S. dollar index based on its weakness and record low levels against the euro. Major concern is that further Dollar weakness may lead to higher bond yields and may put upward pressure on commodities that are priced in U.S. dollars.
Stocks may have increased volatility if Treasury yields move higher and the U.S. dollar declines further. Traders will need to keep a watch on other markets, the U.S. dollar, treasury yields and market reaction to earnings and M&A activity to help define the types of conditions that will define the trend next week.
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Traders will be focusing also on the U.S. dollar index based on its weakness and record low levels against the euro. Major concern is that further Dollar weakness may lead to higher bond yields and may put upward pressure on commodities that are priced in U.S. dollars.
Stocks may have increased volatility if Treasury yields move higher and the U.S. dollar declines further. Traders will need to keep a watch on other markets, the U.S. dollar, treasury yields and market reaction to earnings and M&A activity to help define the types of conditions that will define the trend next week.
