Morning Note - Recovery in store for stocks

by James Gerrish 17 September 2010

**17/09/10  -  8.24am  -  by James Gerrish** 

 
I thought we might have seen some profit taking coming into the US last night after a pretty sombre day in Asia yesterday that saw the S&P/ASX 200 off 56 points or 1.2% while China was down nearly 2% and Japan was also weaker. It looked like this would be the case with the market in the red early before a strong back end of the session pushed the Dow Jones higher. 

Better than expected data on first time Jobless Claims offered some support while after market there was some positive company reports from Research in Motion (maker of the Blackberry) and Oracle. Oracle was particularly interesting as it shows that  companies are spending on IT infrastructure. This is occurring on two fronts. In emerging markets companies are spending due to expansion while in the developed nations, companies are spending on technology to reduce the costs of doing business in an environment of slower growth. 

On the market last night, the DOW JONES added +22 points or +0.21% to close at 10,594. In the UK, the FTSE 100 lost -15 points or -0.28% to close at 5540. Locally, the SPI Futures contract is pricing a better open this morning of +24 points. 

We spoke yesterday about the key technical levels in the US market sighting the S&P 500 which has key resistance at 1130. This level was not breached last night so from a technical sense, the market still remains in limbo. 
 


The market has really been focussed on the light volumes that have been occurring and this was largely put down to US Institutions being out of the fold. September usually signals an uptick in volume and the large players have a decision to make. To me this suggests that the next move in the market on high volume will dictate the trend over the next month or so. Follow  the weight of money as they say...! 

The currency markets have been instrumental in determining the trend in equities over the last month or so with the Japanese intervention being a major talking point. US Treasury Secretary Timothy Giettner fell short (only just) of calling China a currency manipulator last night reaffirming the American stance that China needs to let the Yuan appreciate to create a level playing field for US exporters to China. China though is in a seat of power and has no real reason to let the Yuan appreciate. China is currently holding $846 billion of US Treasuries and is the major funding source for the US Government.. 

 A positive open locally with some recovery from yesterdays weakness. 

Disclaimer

James Gerrish is an Authorised Representative (Rep No. 352904) of Shaw Stockbroking Limited ("Shaw Stockbroking"). Shaw Stockbroking is a holder of Australian Financial Services Licence No 236048. Shaw Stockbroking, its directors, officers, associates and employees each declare that they, from time to time, may hold interests in financial products and/or earn brokerage, commission, fees or other benefits from financial products mentioned in this e-mail or attached documents. Unless specifically stated within this page or an attached document, any information communicated by this e-mail constitutes unsolicited general financial product advice which has been compiled without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you need to consider the appropriateness of this information having regard to your individual objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance or relate to a future matter.
 

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