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Dallas, TX
February 3, 2010, 08:00 EST |
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Dr. Joe Duarte's Market I.Q. |
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The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
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Bear Case Likely To Be Tested Soon
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What's Hot Today: |
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U.S. stock index futures were predicting a flat opening
on Wednesday. After two days of heady gains, traders are likely to start
thinking about the employment report.
Today's Economic Calendar:
- MBA Purchase Applications 7:00 AM ET
- Challenger Job-Cut Report 7:30 AM ET
- ADP Employment Report 8:15 AM ET
- Treasury Refunding Announcement 9:00 AM ET
- 3-Yr Note Announcement 9:00 AM ET
- 10-Yr Note Announcement 9:00 AM ET
- 30-Yr Bond Announcement 9:00 AM ET
- ISM Non-Mfg Index 10:00 AM ET
- EIA Petroleum Status Report 10:30 AM ET
News For Thought
Terrorist attack "certain" in U.S., say intelligence chiefs. According
to CNN.com: "Another attempted terrorist attack on the United States in coming
months is "certain," the heads of major U.S intelligence agencies told a Senate
committee Tuesday. Al Qaeda remains the top security threat to the United States,
but a growing cyber-security threat also must be addressed by the U.S. intelligence
community, the heads of the CIA, the FBI and other agencies told the Senate Intelligence
Committee."
Christmas bomber providing intelligence. According to The Washington Post: "Umar
Farouk Abdulmutallab, the man accused of trying to blow up a jet airplane on
Christmas Day, has been providing FBI interrogators with useful intelligence
about his training and contacts since last week, Obama administration sources
said Tuesday. "
Explosives wash up on Israeli shores. According to The New York Times: "Security
forces searched Israel’s coastline and closed beaches in the south on Tuesday
after two barrels of explosives washed up on the shores of Ashkelon and Ashdod,
north of Gaza. A police spokesman said that the explosive devices, discovered
Monday, were apparently intended for attacks on ships or beachgoers. In Gaza,
a spokesman for the Popular Resistance Committees, a militant group, said that
many more such explosives were still in the ocean and that they were intended
to avenge the death of Mahmoud al-Mabhouh, a veteran Hamas operative killed last
month in Dubai, in the United Arab Emirates." The Times added: "Israeli security
officials said that two devices exploded more than a mile off the Gaza coast
on Jan. 29."
The war against terror continues. It has been fought at a level somewhat under
the radar with regard to the news, at least when it comes to details. Yet, it's
clear that it goes on and that the potential for a large attack of some sort,
especially against the U.S., is on the rise.
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Bear Case Likely To Be Tested Soon
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Can This Rally Continue Unabated With Friday's Employment Report Ahead?
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The stock market is due for the doubt before the employment
return period, where trade becomes fairly dull as players wait to see what
happens on Friday. And while tomorrow's column will deal with the pre-employment
report tea leaves, today, we'll look at where the bulls and the bears stand
after a two day rally with lots of pomp and circumstance.
The action in the stock market in the first two days of February is alarming
to the bears as they thought that last week’s market weakness was the beginning
of a long awaited correction from the March bottom. Anyone who follows the markets
is aware of the litany of issues that suggest that stocks should fall. Among
them are earnings that may have been factored into already high stock prices,
the political issues in Washington, the rising deficits, and now an apparent
deficit enlarging new budget from the White House.
Chart Courtesy of StockCharts.com
What’s at issue here, for traders, though, is whether the two day rally to start
the new month is a fake out, or a lasting rebound that will take the markets
to new highs. And for that, we should look at the charts and at what could happen
the rest of the week.
The chart for the S & P 500 is fairly clear on this, as the 1120-1125 area
remains fairly stout resistance. Somewhere in the midst of that range are the
20 and the 50-day moving averages, which have been excellent support for the
market from the March 2009 bottom. Sustained breaks below those key lines, and
failures to rise back above them would be signs that that the correction is the
real outcome of the current trading range.
Chart Courtesy of StockCharts.com
Yet, if you look at the market's breadth, or the difference between the number
of stocks that are advancing and declining, you get a bit more perspective about
the bounce. First, the NYSE Advance Decline Line (NYAD) shows a decent bounce,
although it could take several good days for the line to make a new high. On
the other hand, the Nasdaq Advance decline line (NAAD) is showing that the Nasdaq,
where tech stocks and lots of recent market leaders reside, is a much weaker
area of the market. That suggests that the advance in the market is starting
to get narrower, and that's often a sign of future weakness.
Chart Courtesy of StockCharts.com
What it means is that the market is in some kind of transition zone, and that
Friday's report is likely to be a big influence on the direction of things.
Conclusion
As it's been the case for the last several months, and perhaps years, the first
Friday of the month, the day of the Employment report, is likely to be pivotal
for the market.
The connections are numerous as the number will have repercussions beyond trading.
Politics, the current budget, and the potential for what happens in the November
election depend largely on what happens to the job market.
The tea leaves on that report will start to come out today and later this week
with the data from Challenger, ADP, and Monster Worldwide, as well as jobless
claims. We'll explore those reports here in tomorrow's column.
Still, no one knows what lurks in the hearts of the bean counters at the Labor
Department, and the private sector data, highlighted above in the three reports,
is not guaranteed to be a good predictor of what the actual employment report
will say.
What’s the bottom line? If the S & P closes out the week above its 20 and
50 day moving averages, the burden of proof will have shifted back to the bears.
Know when to sell and how to make money when the market falls. Get a detailed
trading plan in your pocket. Read Dr. Duarte's All NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for
All Seasons. Also Available As Kindle Books. |
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Market Moves - Stock Of The Day
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Goldman Sachs (NYSE: GOOG) And Google (Nasdaq: GOOG) Are Sending Cautious Message
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Chart Courtesy of StockCharts.com
Goldman Sachs (NYSE: GOOG) And Google (Nasdaq: GOOG) are
sending a message of caution to the market.
Chart Courtesy of StockCharts.com
When market leading stocks are nowhere near their 52 week
highs, you have to wonder about the state of the market.
And these two bellwethers are way off the mark, suggesting
that not all may be well in Stockland these days.
Both stocks have been making lower highs and higher lows, which means that they
are in down trends. Google, though, is still above its 200 day moving average,
so you can make a case for it being in a long term up trend, despite intermediate
term weakness.
Goldman Sachs, though, is a different story. The stock is fighting to move back
above its 200-day moving average. And the action there in the next few days could
be crucial.
That brings up two possibilities. One is that Google and Goldman are no longer
market bellwethers, so that their performance doesn't matter. This is unlikely,
though, given their visibility, and their positions as leaders in their industry
sectors.
The other possibility is that the market is starting to sense that big troubles
could lie ahead and that the smart money has been heading for the exits.
It could take months to prove if this analysis is correct, but it's worth noting
anyway.
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