As I listened to today's televised Democratic Presidential debates, it would seem rather apparent from a Presidential- hopeful point of view that the U.S. is headed for disaster.
Stocks turned sharply lower in their final hour of trade with the Dow Industrials (INDU) 9,343.96 -0.86% falling 81 points by the close, and 65 points in the final hour, where in absence of any other explanation, may have been triggered by today's televised Democratic debate (03:00 PM EDT), where Presidential hopefuls laid out their thoughts at to why the U.S. economy is headed for disaster.
President Bush and his administration came under fire, with focus that the President's recently initiated tax cuts had failed to stimulate the economy, had exacerbated a growing budget deficit, but more importantly, had failed to stimulate jobs growth, which all combine for "disaster," a term used by Representative Dick Gephardt of Missouri in today's debate and criticisms of the current administration.
And Presidential-hopefuls may have gotten some confirming economic data for their view that the jobs market is still weak after the Conference Board's Help Wanted Index showed a 1-point decline to 38 in August, and was below economists' forecast of 39. While weekly jobless claims came in at 381,000, well below economists' expectations of 400,000, the Labor Department cautioned that the number was probably skewed lower as new filers for unemployment insurance most likely delayed their filings until this week due to hurricane Isabel, that hit the East Coast last week.
While I'm not certain the U.S. economy is headed for "disaster," August durable goods orders fell 0.9% in August, the first decline since April, and was well below economists' forecast for a 0.6% gain.
One observation that I'm just now making as it would relate to today's 10:00 AM EDT release of a weaker than forecasted Help- Wanted Index, was that the AMEX Gold Bugs Index ($HUI.X) 201.20 - 4.41%, which was today's sector loser, reached its intra-day high and all-time high of 213.88 just prior to the 10:00 AM EDT mark. While my intra-day commentary suggested some profit taking and perhaps some end of quarter rebalancing, the rather sharp intra- day reversal at 10:00 AM is suspicious.
Losses were extended into today's close on reports that an earthquake with a magnitude of 8.0 rocked Hokkaido in northern Japan early Friday morning, at approximately 04:50 AM (03:50 PM EDT), which derailed a train, touched off an industrial fire and knocked out power.
A powerful aftershock, which took place about an hour later had the government warning local residents to avoid coastal areas due to the possibility of tsunami, or ocean waves caused by seismic activity. Japan's Meteorological agency said waves as high as 3 feet were building near the city of Kushiro, while hours later, NBC reported waives growing as high as 7 feet.
The shallowness of the quake had the Pacific Tsunami Warning Center in Hawaii placing a tsunami warning for Japan, Russia, Guam, the Northern Mariana islands and Wake Island, while at the same time placing a tsunami watch in effect for Hawaii, Taiwan and the Philippines.
A quick look at the December S&P futures contract (sp03z) shows today's settlement at 997.80, with current trade (07:38 PM EDT) at 996.60, and would be viewed stable, but lower, as traders await Asian market openings.
On Thursday, Japan's Nikkei-225 (NIKK) fell 192.25 points, or - 1.83%, to close at 10,310.04, while Taiwan's Taiwan Weighted edged down 34 points, or -0.6% at 5,688.
Pivot Matrix -
I'm looking for a reversal day to the upside tomorrow. How about you?
First thing in the morning, lets keep an eye on Japan's Nikkei- 225 and as news reports begin to come out of Japan, the markets will have more complete information on any damages from the earthquake.
If there was one index that had be cautious from the bullish side today, it was the smaller-cap Russell-2000 Index (RUT.X) 495.06, which never could find a bid in today's trade. The bullish side of me would think there was some profit taking into the quarter, and losses in some of these smaller to mid-cap stocks, where there can be some liquidity problems when everyone wants to take profit may have had this group of stocks just unable to find a bid today, a weakening economy, or firmer belief that from today's durable orders data that there is still some bumps in the road to longer-term economic growth, does have the smaller caps vulnerable and susceptible to some profit taking.
Still, I thought the dollar traded well today, and for the bulk of the session, the major indices, which did see choppy trade, held either side of unchanged for the bulk of the session, but just seemed to give up into the final hour of trade.
For a rebound, I'd look for the SPX/OEX to undercut their psychological levels of 1,000 and 500 support. I can imagine lots of bullish stops just under these levels. Then I'd look for support tests of the correlative MONTHLY Pivots/DAILY S2 of 994 and 498 to find some intra-day support, and for reversal strength to build, look for bullish entries above the DAILY pivots.
With this envisioning of a morning trade then finding a rebound, let us keep in mind that tomorrow morning at 08:30 AM EST, Final Q2 GDP will be released, where forecast is for the economy to have been growing at a 3.1% annual rate, and the Final Q2 Chain Deflator to be +0.9%. Then at 09:45 AM EST, the revised University of Michigan Sentiment for September is due out. This should not be a "market moving" number, but forecast is for 88.5, which is a slight up-tick from the preliminary 88.2.
S&P 500 Index Chart - Daily Intervals
The SPX has seen a pretty good pullback this week, and it now pulls into its summer base. I get the feel that "destiny calls" for a dip under 1,000, maybe look for some weak bullish hands to give in to a psychological 1,000 level being broken, even a break of the 50-day, clean out some stops, and then look for a move higher to build where in dashed-blue, I've placed tomorrow's DAILY Pivot. An upside rebound target for a swing-trade type of trader isn't a new high, but 1,025.
Today's trade saw a net loss of 1 stock to a point and figure sell signal as this broader bullish % fell 0.2% to 81%.
Dip buying, for lack of a better term has been panning out well for bulls, but I would NOT go overboard on these high levels of bullish percent. I do think however that there are plenty of bears below the once psychological resistance of 1,000 that have seen 1,036 that will be readying to get squared.
S&P 100 Index Chart - Daily Interval
Let's turn the table on my envisioning of a bullish trade scenario, and lay out bearish strategy. The OEX certainly looks to be vulnerable to 498.30, if not 493. If the dollar falls apart tomorrow on some type of unseen revision to Q2 GDP, then the OEX in my mind should not trade above 505. Still, a bear would need to monitor 498 as support.
While 500 is a nice round psychological level, it would also be the apex of the bullish wedge, where we would look for some price stability, after the OEX broke above this wedge on September 6 and released pressure to the upside that had seen buyers and sellers battling things out this summer.
Today's trade saw no net change in the narrower S&P 100 Bullish % ($BPOEX). Still "bull confirmed" at 84%.
Dow Industrials (INDU) Chart - Daily Interval
The OEX/SPX has pulled further back into its summer base than the INDU has, but would still look for some formidable support to be in the 9,304-9,339 area. Dow struggled most today with EK's 17.9% decline helping keep the Dow underwater and may also have weighed on any bullish market psychology. I would certainly think that even if a bull bought 9,300 and Dow fell to 9,200, a rebound back to 9,300 would be found.
Today's trade saw no net change in the very narrow Dow Industrials Bullish % ($BPINDU). Still "bull correction" status at 80.00%.
NASDAQ-100 Tracking Stock (QQQ) Chart - Daily Intervals
I had trouble most of the afternoon with my q-charts, and today's bar in not correct. Today's high was $33.74, not $33.98. On the above chart, I'm taking us back to early August when the INDU/SPX/OEX actually moved up before the QQQ advanced and this may be something a QQQ new bull entry on pullback might consider near-term. Our first "cloned" downward trend is back in play as support, and it did hold support in early September. The QQQ is a security of momentum and with WEEKLY S2 now broken, is the only technical support between today's close and MONTHLY Pivot.
In extended hours trade, the QQQ fell to a last tick of $32.67.
Today's trade saw no net change in the NASDAQ-100 Bullish % ($BPNDX). Still "bear correction" status at 79%.