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Market Wrap

Weak Open Finds Mixed 9/11 Anniversary Close

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Stocks opened lower in the U.S., led by a drop in Asian stocks after Japan's government said core private-sector machinery orders fell 16.7% in July after an 8.5% decline in June. The 16.7% decline was much sharper than the -7.5% month-over-month decline forecasted by economists.

Japan's Nikkei-225 fell 286 points, or -1.78% to close at 15,794.38.

The news out of Japan, combined with Great Britain saying producer price inputs fell 1.2% month-over-month versus economists' consensus for a modest 0.1% decline, sent gold sharply lower.

While the FTSE-100 slid 28.5 points, or -0.48% at its close of 5,850.80, the StreetTracks Gold (NYSE:GLD) $58.50 -3.52%, which mirrors spot gold prices (~585.00), plunged to close below its rising 200-day SMA ($58.75) as traders and investors shunned the yellow metal as they weigh the impact of cooling global economic growth rates and inflationary pressures on a broader scale.

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Energy prices were weak again today, but finished well off their midday lows. October Crude Oil futures (cl06v) settled down $0.64, or -0.97% at $65.61 having just undercut the $65.00 per barrel level during today's floor traded session.

Lending to oil's weakness was talk that Iran may freeze uranium enrichment, while OPEC said it would keep its production quota unchanged at 28 million barrels per day.

Multiple moments of silence were observed on the floors of many exchanges during the morning session as traders from around the world honored those who lost their lives on September 11, 2001.

U.S. Market Watch - 09/11/06 Close

Energy-related stocks as well as mining issues did have a negative impact for some of the major indices such as the NYSE Composite ($NYA.X), which finished in the red at 8,262.17. While I don't provide a lot of focus for the AMEX Composite (XAX.X), there are many lesser followed energy and mining names listed on this exchange, which fell 18.73 points, or -0.94% to 1,958.76.

This morning, I thought to myself ... "Will traders really let the majors finish in negative territory, on what should be a patriotic type of session?"

While stocks did seem to recover from their session lows by mid-session with Fed Governor Kohn and St. Louis Fed President Poole speaking, I didn't hear either Federal Reserve representative say much we haven't heard the past couple of months.

If anything, buyers seemed to keep their hands at their sides, honoring those that lost their lives on September 11, 2001, and then began showing the backs of their hands as the S&P 500 Index (SPX.X) clawed its way back to a fraction gain, with the S&P Depository Receipts (AMEX:SPY) $130.41 +0.09% rebounding from the $129.50 level.

S&P Depository Receipts (SPY) - Daily Intervals

Having come close to challenging a multi-year high close of $132.62 earlier this month, buyers have been standing their ground at the $129.50 level after the mid-August break higher above that level.

There wasn't any real "stock specific" news that might give insight into the economy today, and while oil's decline can arguably be tied to some slowing global economic reports, from feverish levels, the geopolitical premiums that are nearly quantitatively impossible to figure out are also coming into play.

Chip maker Texas Instruments (NYSE:TXN) $31.78 +2.51% did reclaims is rather flat 200-day SMA ($31.56) in today's session, but slipped to $31.43 in tonight's after-hours trade when the company gave its mid-quarter (Q3) update.

Company officials said they are now forecasting Q3 sales in the range of $3.71 billion to $3.87 billion, compared with previous estimate of $3.63 billion to $3.95 billion. Semiconductor revenue is expected to account for $3.53 billion to $3.67 billion of the total, the same range as before. The company expects EPS of $0.44-$0.46 versus its previous outlook of 42c-48c. Analysts had projected Q3 earnings of $0.45 a share on revenue of $3.8 billion.

While a drubbing in the energy sectors didn't help the S&P 500 (SPX.X) today, let alone the month of September, I think traders and investors will be keying in on some earnings reports and outlooks from the likes of Goldman Sachs (NYSE:GS) $151.00 +0.80% and Bear Stearns (NYSE:BSC) $129.36 +0.28% this week, as well as Best Buy (NYSE:BBY) $47.77 +3.15%.

S&P Industry Weightings - As of 09/08/06

Financials "dwarf" other industry/sector groups when it comes to how the S&P 500 is weighted.

Goldman Sachs (NYSE:GS) reports their earnings before tomorrow morning's opening bell with consensus at $3.10/share.

Best Buy (NYSE:BBY) $47.77 +3.15% finished off its session highs of $48.59 as it struggles with a trending lower 50-day SMA ($47.23). It too will report earnings before tomorrow's opening bell with consensus at $0.44/share. Close attention will be given to any OUTLOOK into the holiday shopping season, and any near-term trends that may, or may NOT be developing from a decline in gasoline prices.

Then on Thursday, before the market opens, Bear Stearns (NYSE:BSC) is slated to release its quarterly financials. Current consensus among analysts is for the broker to report earnings of $2.95 per share.

After taking a vacation last week, I updated myself, other traders, and investors in the OptionInvestor.com Market Monitor as to the status of various sector bullish % with Dorsey/Wright's Sector Bell Curve.

Dorsey/Wright's WALL street sector bullish % (BPWALL) is currently in "bear alert" status at 68.29% (bear alert is when a bullish % falls from above 70% to below 70%) having recent reached a very "overbought" (above 70%) measure of 80%.

Dorsey's RETA iling sector bullish % (BPRETA) is currently in "bear correction" status at 40%, having just reversed up from near-oversold (30% or lower is considered longer-term oversold) readings of 34%.

Securities Broker/Dealer Index - Daily Intervals

Institutional traders as well as "retail traders" should be returning from their summer vacations. Volumes at the NYSE have been VERY brisk relative to last summer, roughly 500 million shares per day on average more volume this summer at the big board than last summer and I'm looking for some "bullish confirmation" in this week's earnings from the likes of Goldman Sachs and Bear Stearns to create a "go long the brokers" on a move above the 212 level, which in my opinion, should trigger some broader bullishness for financials in general, and lift the SPX/SPY to new 52-week highs by year's end.
 

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