Not So Rosy Afterall...
Today was a photocopy playback of what happened back in 9 Aug as the Dow was tackled down for 362.14 points after entering the 30 DMA resistance band that I mentioned yesterday. It is incredible and scary to see how the market action is almost exactly the same as what happened back in August even though market fundamentals then were very different from what it is today. Will we see the market going lower over the next few days like it did back in August before a rebound? What's your take?
Today's message was a cautious one pointing to controlled inflation and growing jobs in a contracting manufacturing sector. The core-PCE is one of the heavy weight inflation indicators that Uncle Ben and his crew watch very closely and having it turn in 1.8% year over year certainly continues to keep interest rate hikes as a distant possibility. The real concern here is the ISM index moving lower for a 4th straight month to near contractionary levels of 50.9 (where a reading below 50 indicates a contracting manufacturing sector). This, coupled with the Chicago PMI dipping below 50, seems to indicate more bad times going forward.
On the earnings front, the effects of the sub-prime meltdown are starting to show up on the balance sheets of the big banks at last. We saw Merrill Lynch sacking their CEO 2 days ago and today, huge losses on the sub-prime front are showing up on Citigroup's balance sheets too. In fact, many asian banks exposed heavily in CDOs are hit pretty hard too. In fact, I think we would see many more of such losses turning up across the Financial sector in the coming earnings seasons.
Tomorrow's job report would definitely move the market in a big way with investors looking for something to believe in. Will the proverbial shoe drop tomorrow with the all important job report?
Today's message was a cautious one pointing to controlled inflation and growing jobs in a contracting manufacturing sector. The core-PCE is one of the heavy weight inflation indicators that Uncle Ben and his crew watch very closely and having it turn in 1.8% year over year certainly continues to keep interest rate hikes as a distant possibility. The real concern here is the ISM index moving lower for a 4th straight month to near contractionary levels of 50.9 (where a reading below 50 indicates a contracting manufacturing sector). This, coupled with the Chicago PMI dipping below 50, seems to indicate more bad times going forward.
On the earnings front, the effects of the sub-prime meltdown are starting to show up on the balance sheets of the big banks at last. We saw Merrill Lynch sacking their CEO 2 days ago and today, huge losses on the sub-prime front are showing up on Citigroup's balance sheets too. In fact, many asian banks exposed heavily in CDOs are hit pretty hard too. In fact, I think we would see many more of such losses turning up across the Financial sector in the coming earnings seasons.
Tomorrow's job report would definitely move the market in a big way with investors looking for something to believe in. Will the proverbial shoe drop tomorrow with the all important job report?
Labels: core-PCE, fundamental analysis, ISM, PCE, technical analysis, us economy, us market
posted by Jason Ng at 6:35 PM
2 Comments:
I think 13378 will be impt level...
Rav
How did you arrive at that figure Rav? :)
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