Tuesday, October 27, 2009

Projections for the Downtrend

Tech Talk:

The sellers have reasserted their control over this market. The E-Minis pulled yet another U-turn, this time on very high volume.

The Conference Board, a private research group, today released the newest data pertaining to its Consumer Confidence Index. Results were disappointing and unexpected, showing a reading of only 47.44 for October (whereas a level of 53.1 had been forecast), the second lowest reading achieved since May of this year. Levels above 100 indicate strong growth whereas readings above 90 show a solid economy. Market observers believe that the outlook for the 'holiday shopping season' is likely to be gloomy given today's low consumer confidence numbers which are a barometer for spending. According to the Conference Board, the outlook is for fewer jobs, lower salaries, as well as a worsening business climate, a poor mix for retailers.

In contrast, the latest installment of the Standard & Poor's/Case-Shiller home price index, a study of real estate transactions in 20 major cities across the US, painted a rosier picture. In August, home prices rose, showing their third consecutive monthly increase, with the home Price Index climbing 1% from its July levels. Home prices currently remain some 30% off their May 2006 peak levels.

As noted above, the Dow outperformed the other major indexes today, trading in the green for a good part of the session. Market analysts attribute this positive divergence to the fact that one of its components, IBM, announced it would double its stock-repurchase plan. As well, strength in energy stocks (for instance of Dow component Exxon Mobil) also contributed to the Dow's relative strength today. A number of key oil companies (Exxon, ConocoPhillips, Chevron, and others) are set to report earnings this week. The sector also profited today from strong earnings released by BP.

Market observers say that trading may continue to be volatile and choppy for the balance of this week as the fiscal year end for many mutual funds approaches. This is often a time where fund managers do some late readjusting of their investment portfolios.

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