Daily Market Briefing

By 21 Oct 2010 0 comments

Fundamentals:

Markets will likely focus on the Eurozone today as the purchasing managers’ index (PMI) data for both manufacturing and services is released. Markets are looking for small decreases for October but these releases are expected to remain above the expansionary 50 level.  Manufacturing numbers could disappoint, given the negative ZEW data released recently.

Leading indicators for both Canada and the US will also be released.  For the US, analysts will be looking for the number minus “market components,” which include things like stock market and treasury spreads. This number has been weak during the previous 5 months.  The Philadelphia Fed business outlook index (OCT) is also set to be released, with the consensus looking for an increase after two negative monthly readings.

Data from China overnight showed that the impetus for raising interest rates was tied to raises in inflation.  Consumer prices rose 3.6% yearly for September after a 3.5% rise previously.  Producer prices also rose, growing 4.3%. Third quarter GDP is seen down, to 9.6% yearly after a 10.3% rise in the second quarter. Retail sales saw modest gains, but production and fixed assets decreased year-over-year.

In equities, the report from Wells Fargo showed that credit portfolio improvement is continuing for US banks.  Boeing saw gains from strong orders, helping erase some of the production delays that have been seen recently.  Based on this, Boeing raised its earnings per share forecast to the high end of its projected range, and this represents a positive for the global economy as a whole.

United Technologies also beat market expectations with their earnings report, the number was aided by sales of jet engines.  Lastly, Ebay surprise to the upside, lifting their earnings projections for the fourth quarter. All of this information is very positive for equity markets, helping sentiment after the surprise rate high in China.

European earnings will be important today, with reports from Nokia.  We will also see releases from Caterpillar, Amazon, Eli Lilly, UPS and AT&T out of the US.

Technicals:

Commodities:

Oil prices are now likely to be forming an expanded range, with the upper end coming in at $84.40 and the bottom near $79.  Prices are currently in the middle of that range, and this correlates with the 4-hour RSI at 53.  Traders can either play this range with tight stops of wait for breaks.   $83.30 is the first resistance.

Currencies:

The GBP/USD has convincingly broken is uptrend channel on the 4-hour charts and found resistance of 1.5830.  The hourly RSI is nearly in overbought territory at this stage, so another move lower cannot be ruled out.  Lower hourly highs also support this view.  Buy pullbacks to the 61.8% Fibonacci retracement at 1.56.  Resistance above is seen at 1.5640 and 1.61.

Stocks:

The S & P 500 has been remarkably faithful the 4-hour uptrend channel that has been mentioned previously.  Markets are making a third attempt at the 1180 level at the time of writing, and it only appears to be a matter of time before that level breaks.  For resistance, we must go back to the daily charts at this point.  The next historical level above comes in at 1216 but there is likely to be some problems with the psychologically important 1200 level.  Support is now seen at 1155.

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