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The Dow Futures Report

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US Equities trade through a seesaw session

Thu, Apr 23 2009, 05:50 GMT
by Paul Brittain

Alaron

US EQUITIES TRADE THROUGH A SEESAW SESSION. VOLATILITY THE CONSTANT AS EARLY LOSSES REBOUND TO GAINS, RETURN TO LOSSES AS OUTLOOK FOR FINANCIALS CONTINUE TO CHALLENGE.

US EQUITIES continued its “Ginzu” style of slice and dice trading as the major indices continue to struggle with the ADD aspect of trying to interpret earnings, government reports, official comments and man on the street whispers.

US equities fell on Wednesday as a late sell-off in the financial sector erased gains made during a choppy trading day on Wall Street as investors digested another busy day of earnings. Earnings were a mixed bag today. Morgan Stanley reported lower and announced it was slashing its dividend. Negative sentiment turned around after Wells Fargo reported a record 1st quarter. Gains were tied primarily to business in mortgage refinancing and its acquisition of Wachovia Bank. Wells Fargo has now passed Bank of America as the US largest holder of consumer mortgages (cause for joy or potential concern?)

The rebound in equities continued to gain momentum on comments from Treasury Secretary Geithner stating that the government would seek to remove itself from the workings of the banking industry as soon as it found a viable opportunity to do so. Additional upward momentum was found from a report showing US home prices posting their first monthly back to back increase in two years. Equities rallied to the top end of their recent range. Failure to pierce these levels and growing concern regarding the quality and sustainability of earnings in the financial sector eroded confidence and drove the major indices to close near the lows of the session. Based on this move, it would appear that Thursday’s reading on existing home sales may be setting up to be a more important indicator for market sentiment that previously thought. Expect continued volatility within the market’s range. A possible test of 824.00 in the S&P and 7670 in the Dow may set up tomorrow if the existing home sale disappoints.

Technically, June Dow futures should find a strong level of support at 7630. A break of this level should set up for a test of 7430. Look for near term resistance to form at 7970, with 8160 remaining as a key breakout level. (options strategists take note.)

Published on  Thu, Apr 23 2009, 05:54 GMT