S&P 500 (Sep 10) INTRADAY
Review U.S. stocks rallied the most in almost two months as better-than-estimated growth in American and Chinese manufacturing bolstered confidence in the global economic recovery. At 56.3 US ISM beat the top range of all analysts estimates, taking the market by surprise and easily negating the poor ADP figure. Alcoa Inc. advanced 3 percent as metal prices gained. Apple Inc. rose 3 percent after introducing iPods and a televi-sion set-top box. Burger King Holdings Inc. surged 15 percent on takeover speculation. The S&P 500 climbed 2.8 percent to 1,082.00 at 4:30 p.m. in New York, the biggest gain since July 7.
Strategy Looking ahead we are expecting a consolidation of yes-terday’s uptrend as positive market sentiment may be partially off-set by mixed macroeconomic data. We are expecting an improve-ment in factory orders after a 1.2 percent drop in June, while pend-ing home sales may continue to show a weak housing scenario. Also, today’s jobless claims should be closely watched ahead of Fri-day’s non-farm payrolls after a negative ADP employment reported yesterday. We think investors may be more cautious today as they should wait for Friday’s employment data before continuing with an aggressive exposure to equities.
Alternative Scenario Weak economic data may lead a retracement of some of yesterday’s gains and a move back below 1063.50 with the 23.60% Fib at 1052.00 as a first target.
EUR/USD INTRADAY
Review The dollar fell against most of its major counterparts as reports showed manufacturing in the U.S. and China accelerated, spurring demand for higher- yielding assets. The euro rallied after the People’s Daily reported Chinese Premier Wen Jiabao said China and western countries should work together to enhance the world’s confidence in the euro and the European Union economy. He made the remarks during a meeting yesterday in Beijing with Spanish Prime Minister Jose Luis Rodriguez Zapatero. The dollar declined 1 percent to $1.2809 per euro at 5 p.m. in New York after touching $1.2856, the weakest level since Aug. 19.
Strategy Looking ahead we are expecting a continuation of yes-terday’s uptrend after positive Spanish and French Bond auctions. We think there is a strong appetite for riskier currencies such as the euro that is negatively affecting the dollar at the moment. Also, to-day’s ECB meeting may provide more details about the potential extension of emergency lending measures for banks into 2011. We think the market could negatively react if three-month loans are not extended.
Alternative Scenario Negative Euro zone fundamental news flow could lead to a break-out of S1 at 1.2687 opening the way for a more aggressive move to last week’s low at 1.2588.
Crude Oil (Oct 10) INTRADAY
Review Crude oil surged the most in a month after manufacturing in the U.S. and China, the world’s big-gest energy-consuming countries, accelerated in August at a faster pace than forecast. Oil climbed as much as 3.6 percent and equities rebounded from the biggest August slump in nine years after the Tempe, Arizona-based Institute for Supply Management’s factory index rose to 56.3 from 55.5 in July. Futures gained even as U.S. crude oil supplies increased 3.43 million barrels to 361.7 million. Crude oil for October delivery rose $2.02, or 2.8 percent, to $73.94 a barrel at the 2:30 p.m. in New York.
Strategy Looking ahead we are expecting a consolidation of yes-terday’s uptrend as positive market sentiment may be partially off-set by concerns about the recent increase in oil inventories. We think the correlation between oil and equities is pretty strong at the moment and today’s macroeconomic data from factory orders to jobless claims should be closely watched in order to get a better direction.
Alternative Scenario Weak economic data may lead a retrace-ment of some of the recent gains and a move back below S1 at $72.24 with Tuesday’s low at 71.52 as a first target.
