DJIM #31, 2010
Monday, August 2, 2010 at 07:00AM In Friday’s trade, the market’s squeaky floor just discussed at ~1098 succumbed to the 1080’s following GDP data, only to be saved by Chi PMI/ confidence number soon after the opening bell. The market’s dominance turning back to macro over micro came one trading day before the expected shift come China’s weekend PMI/ ISM on Monday. Tonight, despite a soft tone China manufacturing PMI, it’s ‘better than feared’ as pace of decline moderating and it comes with PBOC’s statement assuring a moderate loose policy. This is adding to the rebound kicked off in US on Friday to global markets overnight. How long it will last will depend on US ISM to begin week with and NFP# to close week, the main focus will now turn to US with Euro/China decoupling somewhat in macro terms as fears subside for the global economies/markets, but not the US'.
Despite a very strong market gains in July, we saw ‘Steels’ outlooks suffer and Semi’s down >4% this week, signs of technology softening demand is showing up globally (possible correction in technology coming). Simply, these ‘groups’ did not paint a very healthy signal for the broad market and need to be watched closely going forward. It’s almost incredible the market held up last week despite these unfavourable, very possible ominous market trends emerging. The only possible answer is the market is ‘much more’ resilient than just a month before as to why it is holding up and/or it's purely technically driven at this point.
In August, the expectation is for some ‘holiday’ market malaise, but the low volume it will come with will increase volatility. A morning gap rally is irrelevant until last week’s failure to close over 1118 is solved to the upside.