Thursday, January 31, 2008

Quick Market Update

Twitter's down this AM, so I thought I'd post some of my pre-opening material to the blog directly. Reviewing market indicators, overseas markets, and key news items is a major part of my preparation for the day's trade.

At 7:30 AM CT we have Personal Income and Employment data coming out; at 8:45 AM CT, we have the Chicago NAPM numbers. I generally watch fixed income and the dollar as well as stock indexes to gauge whether the markets are treating the data as important new information.

Shares in Europe are down over 1%; the Nikkei was up a little less than 2%; Hong Kong was down almost a percent; and China was down almost 2%. The yield on the 10-yr Treasury is down to 3.61%. Crude is down; gold up. ES futures down almost 6 pts.

Bond insurer woes dominate the news; check my recent post.

Wednesday we saw continued expansion of new 20-day highs--up to 1056--but new lows also expanded to 360. I'll be watching to see if that expansion of lows continues. We have only 23% of SPX stocks trading above their 50-day MA and 21% above their 200 day MA, down from Tuesday. Interestingly, however, short-term momentum continued positive on Wednesday, with Demand at 87 and Supply at 57.

Note the above Advance-Decline Line specific to NYSE common stocks, one very helpful indicator tracked by Decision Point. While the recent rally has been impressive, it has made only a slight dent in this weak indicator.

We've been seeing dollar weakness of late; gold strength. Fed rate cuts amidst economic weakness are contributing to that relationship. This is another sentiment measure I'll be writing about.

Four of the five financial stocks that are part of my basket are trading in uptrends, according to my Technical Strength work; I'm watching that sector closely to see if we get deterioration. As those shares have gone, so has the market overall per my recent post.