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The Dow Futures Report

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US EQUITIES rally back from key support levels

Fri, May 15 2009, 06:07 GMT
by Paul Brittain

Alaron

US STOCKS PULL OUT OF WEDNESDAY’S DIVE AS BUYERS TAKE ADVANTAGE OF BARGAINS IN TECHNOLOGY, FINANCIAL SECTORS.

US EQUITIES rally back from key support levels as buyers took advantage of the four day losing streak in the NASDAQ to purchase technology stocks at perceived bargain prices. The positive sentiment that began in the tech sector offered recovery support to the major indices. In addition, equity buyers took a cautiously optimistic view on the financial sector as the Libor rate, the rate banks charge each other to lend out funds, staged its biggest drop in two months to a record low of 0.85 percent.

Stocks initially retreated to key levels of support after US weekly jobless claims came in lower than expected. The report was expected to reinitiate the negative sentiment which gripped the equity markets on Wednesday after US retail sales staged consecutive monthly drops. The markets shrugged off the poor employment outlook after better than expected earnings from CW systems, the world’s second largest software developer, reported better than expected earnings. This triggered short covering and bargain hunting in the technology sector, which has been subject to strong profit taking since late last week. General Motors continued its downward spiral, dropping 5% after a chief executive of the company reported that bankruptcy was “probable.” Ford shares swung the other way after its chief executive reported that the automaker the company was making “significant progress” on restructuring its balance sheet. The company succeeded in raising about $1.6 billion on Wednesday through a new stock offering. Equities appear likely to have more downside to test in the wake of the strong run up from the 830.00 level in the S&P and 7770 level in the Dow.

Technically, June Dow Futures appear likely to test support at 8220. A break of this could set the market up for a test of significant support at 8096. Renewal of upward momentum should set up target at 8420, with 8590 a key breakout level to the upside.

Published on  Fri, May 15 2009, 06:12 GMT