It seems every weekend we get some "earth shattering" news that can be potential market mover. This time around, we get an apparent "world rescue plan" that's being deployed by various nations to curtail the panic that's been spreading all over the world last week.
Currently, futures are up a healthy amount and frankly it
just feels eerie to us. Why we feel this way should not come as a
shock to anyone because we have just finished one of the most
turbulent, if not the most turbulent trading week ever experienced by a
living soul. The S&P 500 has closed down every single day since the start of the month.
With Friday's apparent reversal from that dreadful opening, many market participants are quickly calling the bottom is in place. Although we wouldn't disagree nor agree with that notion so quickly, we think it is a good possibility. However, here comes the more important phase of "testing the low"! Whatever happens during the next few days, you'd still have many many players refusing to believe we've just hit the low and they'd act that way with their action. In our opinion, regardless whether Friday's low was the low or not, it's still good to see that kind of climatic action at that level.
What are DJIM traders look for then? If assuming the
financial stability is getting in place and that's a big 'if' at this moment,
we'd turn our focus back onto the economy. For some reason, the
potential downturn of the economy is being largely ignored by the
market participants at this moment. Of course, we don't blame them
because we are dealing with a huge crisis here and confidence needs to
be restored in many areas. Assuming, we do get enough
confidence back into our capital system and we avoid anymore large
meltdowns from financial institutions, we'd redeploy our radar onto the
earning front. In the coming weeks, earning news will dominate the
traders' screen along with the usual noise. What we are going to be
look for is quality earning reports. Oh yes, we are definitely
going to be lowering our expectation on earning reports this time
around. We are going to be looking for reports that still carry an
optimistic tone given the circumstance. Relative performance is
going to be the key here.
At this point, there shouldn't be any overvalued, over
inflated companies out there so it will make our buying decisions much
easier. Stay tuned, we feel we won't be sitting idle for much
longer. As far as the immediate trading day, we'd look at it as just that , a trading day with the bond market closed. Without the bond market things will not always seem as they are, still you can't curb buying enthusiasm on any good news after such a miserable streak. Almost all sectors will be up early, but just like Friday, we'd concentrate on the Ag's-chem, high beta's if we're thinking longer than one day. Watch the $CRX for commodity plays off a potential weaker $USD, a stronger oil for energy plays for intraday trades, the $TOP for action overseas to watch for market turns here.