Weekly Stockmarket Report

Top News as reported by Associated Press:

TV shows were replaced by the hiss of static in perhaps 1 million U.S. homes Friday as stations ended their analog broadcasts and abandoned the transmission technology in use for decades.

The vast majority of households that rely on antennas for their TV signals were prepared for the shutdown, but many people remained vexed by the challenge of setting up digital reception.

Historic anti-smoking legislation sped to final congressional passage on Friday -- after a bitter fight lasting nearly a half-century -- and lawmakers and the White House quickly declared it would save the lives of thousands of smokers of all ages. Even more important, they said, the measure could keep countless young people from starting in the first place.

President Barack Obama, admittedly still struggling with his own nicotine habit, saluted passage of the bill, which he will soon sign.

Specifically, the measure for the first time will give the Food and Drug Administration authority to regulate what goes into tobacco products, demand changes or elimination of toxic substances and block the introduction of new products.

Gas prices rose Friday for the 45th consecutive day as summer travelers hit the highways and refineries hold back on fuel production.

Pump prices added less than a penny overnight to a new national average of $2.639 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service.

Gas is 37.2 cents a gallon more expensive than last month. Yet prices have risen all year after slumping to around $1.60 in December.

Crude prices are surging as well, but not as consistently as gasoline.

Under withering criticism in Congress, General Motors and Chrysler executives on Friday called the closings of hundreds of dealerships painful steps needed to right-size the auto giants. Down-on-their luck dealers said the moves would needlessly devastate their local economies and livelihoods.

GM CEO Fritz Henderson told the House Energy and Commerce Committee's oversight and investigations subcommittee the dealer cuts were "quite painful" but necessary to save over 200,000 jobs at GM's remaining dealers. Chrysler Deputy CEO Jim Press said the cuts were part of the shared sacrifices by the United Auto Workers union, bondholders and others needed to avoid liquidation.

The Energy Department is moving forward on a futuristic coal-burning power plant in Illinois that the Bush administration had declared dead.

Energy Secretary Steven Chu said Friday that reviving the FutureGen plant is an important step that shows the Obama administration's commitment to carbon-capture technology.

The Energy Department will commit more than $1 billion to the project, under the agreement announced on Friday, with the government's contribution drawn almost entirely from federal economic stimulus funds.

GlaxoSmithKline said Thursday after the World Health Organization declared a global flu epidemic that it would be ready within weeks to begin large-scale vaccine production. Sanofi-Aventis also said it had started working on its own version. On Friday, Swiss pharma giant Novartis announced it had created an experimental vaccine that has not been tested in people. Novartis' vaccine was made via a cell-based technology that may prove faster than the traditional way of making vaccines, which relies on chicken eggs.

WHO and others estimate that about 2.4 billion doses of pandemic vaccine could be available in about a year.

China's retail sales, bank lending and industrial output grew in May as the government spent heavily on a stimulus to boost the world's third-largest economy as exports plunged, data showed Friday.

The latest report, on top of figures Thursday showing May investment rising, suggested the stimulus spending was helping to make up for a collapse in demand for exports that wiped out millions of Chinese factory jobs.

Retail sales rose 15.2 percent in May from a year earlier, up from April's 14.8 percent growth, the National Bureau of Statistics reported. Industrial output rose 8.9 percent, rebounding from April's lackluster 7.3 percent and exceeding March's 8.3 percent rate.

Now take a look at the chart of the CBOE Volatility Index or VIX below:





















The CBOE Volatility Index reflects investor sentiment and is typically seen as investors' fear gauge. VIX moves in inverse direction to the overall stockmarket i.e. when investors' fear level rises, VIX rises and stockmarket falls and vice versa.

VIX rose to historically unseen levels in October 2008 when it reached high 80s but since then has been downtrending and is now at more normal level just below 30. So investors are feeling a lot calmer about the U.S. and global economy in general and about the state of the stockmarket.

Investors are expecting some form of a recovery at the end of the year and this has caused a huge rally that has lasted for the previous three months.

At present, VIX is at 28.15 and is below both its 20 and 40 day moving average, which is bearish for VIX.

The ADX is below 20 which shows that VIX is trading within a range and is not in an uptrend or downtrend.

MACD is at -1.577 which is just below 0 and so is close to neutral i.e. it is neutral and neither bullish or bearish for VIX.

Slow Stochastic is at 33.826 which is close to the low threshold of 20, this means that there is a greater possibility of VIX rising rather than falling during this week. However since VIX is still below its moving averages any move upwards for VIX will not be with strong momentum. Investor sentiment remains neutral to calm at the moment.

Please take a look at the chart of the S&P 500 Index below:





















The S&P 500 Index is stagnant around the 950 level but has crucially stayed above the 200 moving day average which is a significant level observed by all serious traders. This is bullish for the market.

The index is above its 20 and 40 day moving averages, which is bullish for the index.

ADX is about 23 which means that the index and the overall stockmarket is trading within a range and is neither in a strong uptrend or downtrend.

MACD is at 17 which is positive and bullish for the index.

Slow Stochastic is at 60 which is near midway between its high and low thresholds and thus this is neutral for the index. This means that the index could either go up or down this week or remain around the 950 level.

These indicators are indicating that the market has stayed resilient and staying above the crucial level indicated by the 200 day moving average. Investors are feeling calmer and are still cautiously optimistic about stocks and the pending economic recovery.

However whether the rally can continue will depend on what investors think about rising energy prices and rising interest rates. If investors think that these costs will impede on the potential economic recovery, then the stockmarket could change course and move downwards. However, if investors think that despite these costs, economic recovery will still be possible, then the market could continue to move upwards.

Overall, investor sentiment still seem to be cautiously bullish about stocks and the economy in general. Whether, the market will continue to be resilient during this week will depend on investor sentiment in the face of new data or news.

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To appreciate beauty; to find the best in others; to leave the world a bit better whether by a healthy child, a garden patch or a redeemed social condition; to know even one life has breathed easier because you have lived. This is to have succeeded.

Ralph Waldo Emerson

Weekly Stockmarket Report

As reported by Associated Press:

European stock markets were little changed Tuesday following modest losses in Asia as investors awaited signals about whether the rally of the last three months will continue through the summer.

"Wall Street stumbled ahead of the close after a strong rally and with limited directional data around, how the U.S. performs later today could be instrumental in determining where the European markets close too," said Matt Buckland, a dealer at CMC Markets.

Stock markets have rallied strongly over the last three months largely on better than expected economic data, particularly out of the U.S. As stocks usually start rising 6 to 9 months before actual recovery emerges in the official economic data, investors have bet that the massive sell-off in markets during the most acute phase of the financial crisis was overdone.

Despite the improvement in the economic data, concerns linger about the global economy. With interest rates on government bonds edging higher, unemployment continuing to rise and oil prices back near six month highs, investors are concerned about the sustainability of a potential recovery.

As a result, there are worries in the market that if economic data around the world starts to disappoint expectations, then investors may have to start revising down their recent optimistic tendencies. Some of the world's major equity indexes are now in positive territory for 2009.

And though the financial system may have been saved from collapse, investors still want more evidence that banks are once again lending to businesses and households. So far, there's very little to show that the lenders are doing anything other than improving their balance sheets.

Investors will also be watching announcements in the U.S. about which of the country's biggest banks will be able to repay billions in federal bailout dollars. The government may issue that list as early as Tuesday.

"It appears that there may be as many as ten banks fit enough by stress test criteria that may shortly repay their loans," said David Buik, markets analyst at BGC Partners.

Please take a look at the chart of the CBOE Volatility Index or VIX below:





















VIX is like a fear gauge and reflects investors' level of fear. VIX reached a historical high in October 2008 and since then has come down a lot. So VIX and the overall stockmarket moves in opposite direction to each other i.e. when VIX rises, investor fear increases and stockmarket moves down and vice versa.

As the rally that has lasted the past three months show, VIX has come down to reflect investor optimism towards the U.S. and global economy. Investors seem to be quite optimistic and is expecting some form of recovery by the yearend.

From the chart above, VIX is still below both its 20 and 40 day moving averages which is bearish for VIX.

However, the MACD for VIX although still negative, has stayed above its signal and seems to be indicating a move upwards. This is bullish for VIX.

The Slow Stochastic is at 52.95 which is neutral for VIX and is above its signal.

So depending on investor sentiment in regards to whether investors think a sustained rally is feasible, there are both bearish and bullish indications for VIX which means that VIX could either go up or down in the following weeks depending on whether investors will continue to support a stockmarket rally.

Take a look at the chart for S&P 500 Index below:





















The S&P 500 Index has remained above both its 20 and 40 day moving averages which is bullish for the index. Most crucially, the S&P 500 Index has finally closed above its 200 day moving average, which is extremely bullish for the Index as most traders would see this as a bullish signal to buy stocks. Time will tell whether this rally is actually the "bottom" for the market or whether it will retest previous lows. It all really comes down to investor perception on what sort of economic recovery they are expecting.

Looking at the chart above, the MACD has stayed positive which is bullish for the index, and it has stayed above its signal, another bullish sign for the index.

The Slow Stochastic is at 69.56 which is close to its high threshold of 80. But if sentiment remains bullish, the Slow Stochastic still has room to move upwards.

So from the chart for S&P 500, investor sentiment still seems to be quite bullish. The crucial sign is that the index has finally moved above its 200 day moving average which is an extremely bullish signal for traders. As long as sentiment remains bullish about the economic recovery, this rally could well be the start of a bull market in stocks. Only time will tell.

This is this week's economic calender:

Jun 9 10:00 AM Wholesale Inventories Apr
Jun 10 8:30 AM Trade Balance Apr
Jun 10 10:30 AM Crude Inventories 06/05
Jun 10 10:35 AM Crude Inventories 06/05
Jun 10 2:00 PM Treasury Budget May
Jun 10 2:00 PM Fed's Beige Book
Jun 11 8:30 AM Retail Sales May
Jun 11 8:30 AM Retail Sales ex-auto May
Jun 11 8:30 AM Initial Claims 06/06
Jun 11 10:00 AM Business Inventories Apr
Jun 12 8:30 AM Export Prices ex-ag. May
Jun 12 8:30 AM Import Prices ex-oil May
Jun 12 9:55 AM Mich Sentiment-Prel



Reference

Yahoo Finance
Bigcharts.com


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To appreciate beauty; to find the best in others; to leave the world a bit better whether by a healthy child, a garden patch or a redeemed social condition; to know even one life has breathed easier because you have lived. This is to have succeeded.

Ralph Waldo Emerson

Weekly Stockmarket Report

Top news for the week:

*General Motors battered by the economic downturn, mounting debt and management problems, will file for bankruptcy Monday.

It will be the largest industrial bankruptcy in U.S. history and the fourth-largest overall and comes as smaller rival Chrysler appears ready to make an exit from its court proceedings.

The bankruptcy will give the government a 60 percent ownership stake and an unprecedented role in reshaping the auto industry.

President Barack Obama planned to announce his support for General Motors as it enters bankruptcy protection, by aiming to provide billions more in government aid and protect the taxpayers' investment without interfering with the company's day-to-day operations.

* World stock markets rose strongly Monday (1st of June) after closely-watched manufacturing surveys reinforced hopes that the global economy may start to recover by the second half of the year.

In China, brokerage CLSA Asia-Pacific Markets said its monthly purchasing managers index -- a broad gauge of activity -- rose to 51.2 in May from April's 50.1. Anything above 50 indicates an expansion. The state-sanctioned China Federation of Logistics and Purchasing said its own PMI eased slightly to 53.1 from April's 53.5 but still showed activity expanding.

Meanwhile, data provider Markit found that its manufacturing purchasing managers' index for 16 countries that use the euro was revised up to a seven month high of 40.7 in May from the previous estimate of 40.5, while the Chartered Institute of Purchasing and Supply said its purchasing managers index for Britain rose for the third month running to 45.4 in May from 43.1 in April.

*The U.S. economy sank at a 5.7 percent pace in the first quarter as the brute force of the recession carried over into this year. However, many analysts believe activity isn't shrinking nearly as much now as the downturn flashes signs of letting up.

The Commerce Department's updated reading on the gross domestic product, released Friday, showed the economy's contraction from January to March was slightly less deep than the 6.1 percent annualized decline first estimated last month. But the new reading was a tad worse than the 5.5 percent annualized drop economists were forecasting.

*Long-term borrowing rates fell back on Thursday as investors returned in numbers to pick up newly issued Treasury notes.

The 10-year Treasury note -- a widely used benchmark for home mortgages and other kinds of consumer loans -- gained nearly a point, sending its yield back down to 3.62 percent from 3.75 percent the day before.

Investors had sold off bonds on Wednesday, pushing long-term yields to their highest level in six months, on worries that the flood of U.S. government debt hitting the market this year would overwhelm demand.

Those concerns abated on Thursday after the Treasury Department saw solid demand at an auction of $26 billion in seven-year notes, the third and final auction this week in which the government sold a total of $101 billion of debt.

*U.S. banks turned a profit in the first quarter, but the number of problem banks jumped to the highest level in 15 years and tough conditions persist for the industry, the government said Wednesday.

The Federal Deposit Insurance Corp. said higher trading revenues and lower borrowing costs at big banks helped the industry earn a $7.6 billion profit in the January-March period, compared with a record loss of $36.9 billion in the fourth quarter. The profit was 61 percent below the $19.3 billion earned in the year-earlier period and followed the first quarterly loss in 18 years.

*Major oil producer Saudi Arabia spoke out Wednesday against reducing OPEC's output -- the latest sign that the 12-nation cartel will keep production at present levels. But instead of falling on the news, crude prices climbed to six-month highs.

Even before Saudi Oil Minister Ali Naimi spoke, the recent jump in oil prices was working against hardline OPEC members who were advocating even costlier crude. Naimi's comments reinforced expectations that OPEC oil ministers meeting Thursday would decide to not change oil production levels. The Saudis account for close to a third of OPEC's total production and what they say is usually informal policy for the rest of bloc.

Next take a look at the chart of the CBOE Volatility Index or VIX which is a gauge of investor fear.





















The VIX has been on a downtrend since December 2008, which is good news for stock investors. Basically, the VIX and the sharemarket moves in the opposite direction to each other. When VIX goes up, investors are fearful and thus selling causes share prices to fall and vice versa.

Since VIX has been falling, the sharemarket has experienced a rally from March to June of this year. So investors seem cautiously optimistic about a recovery in the U.S. and global economy perhaps at the end of this year (since the stockmarket is usually 6-9 months ahead of the real economy).

Even the bankruptcy of GM has failed to depress investor optimism.

VIX is below its 20 and 40 day moving averages. VIX has recently made a move upwards and yet has come back down. The MACD is below 0 but above its signal. The slow stochastic is at 44.133 which is almost midway between its low and high thresholds. So the indicators are giving mixed messages i.e. VIX could move up or down this week depending on investors' reactions to this week's economic news.

Next take a look at the S&P 500 Index chart below.




















The S&P 500 Index has been trading within a range in June and has neither been in a strong downtrend or uptrend.

The Index has finished above both the 20 and 40 day moving averages which is bullish for the index and is reflective of the investor optimism that was discussed above.

The MACD is positive which is bullish but is below its signal. The slow stochastic is at 66.522 which is approaching the high end of its range, so could be approaching overbought levels in the short term.

Thus depending on investor reactions to GM bankruptcy and other economic news this week, the sharemarket could continue to move up for 1 to 2 more days but come down a bit due to approaching overbought levels.

This is this week's economic calender:

Jun 1 8:30 AM Personal Income Apr
Jun 1 8:30 AM Personal Spending Apr
Jun 1 10:00 AM Construction Spending Apr
Jun 1 10:00 AM ISM Index May
Jun 2 10:00 AM Pending Home Sales Apr
Jun 2 2:00 PM Auto Sales May
Jun 2 2:00 PM Truck Sales May
Jun 3 8:15 AM ADP Employment Change May
Jun 3 10:00 AM Factory Orders Apr
Jun 3 10:00 AM ISM Services May
Jun 3 10:30 AM Crude Inventories 05/29
Jun 3 10:35 AM Crude Inventories 05/29
Jun 4 8:30 AM Initial Claims 05/30
Jun 4 8:30 AM Productivity-Rev. Q1
Jun 4 8:30 AM Unit Labor Costs Q1
Jun 5 8:30 AM Average Workweek May
Jun 5 8:30 AM Hourly Earnings May
Jun 5 8:30 AM Nonfarm Payrolls May
Jun 5 8:30 AM Unemployment Rate May
Jun 5 2:00 PM Consumer Credit Apr


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To appreciate beauty; to find the best in others; to leave the world a bit better whether by a healthy child, a garden patch or a redeemed social condition; to know even one life has breathed easier because you have lived. This is to have succeeded.

Ralph Waldo Emerson

Weekly Stockmarket Report

Top News For The Week

*President Barack Obama warned overeager shoppers and greedy credit card companies alike on Friday to act responsibly as he signed into law a bill designed to protect debt-ridden consumers from surprise charges.

*Ford Motor Co. said it is giving its hourly workers five more weeks to decide whether they want to accept the company's buyout and early retirement offers.

*Federal regulators on Friday adopted a new system of special fees paid by U.S. financial institutions that will shift more of the burden to bigger banks to help replenish the deposit insurance fund.

*A federal appeals court on Friday agreed with the major elements of a 2006 landmark ruling that found the top U.S. tobacco companies guilty of racketeering and fraud for deceiving the public about the dangers of smoking.

*The U.S. government could eventually own a majority stake in GMAC Financial Services following its latest $7.5 billion aid package to the ailing auto financing company.

*In the U.S. shareholders have yet to vote down a single executive pay plan at U.S. companies and only a handful of corporate directors have lost investor backing. Support for corporate management and executive pay is still the status quo.

*In the U.S. the number of people who are continuing to receive jobless benefits rose to nearly 6.7 million from about 6.6 million, the Labor Department said. That's the highest total on records dating to 1967 and the 16th straight weekly record.

*The Federal Reserve expects the economy to improve in coming months, even as policymakers downgraded their outlook for all of 2009 and said the unemployment rate could approach 10 percent.

*President Barack Obama is asking consumers to put their money -- up to $1,300 per new vehicle by 2016 -- behind his plan for higher efficiency standards for cars and trucks and tougher rules on their greenhouse gas emissions.

Drivers would make up the higher cost of more fuel-efficient, cleaner vehicles by buying less gas at the pump. It would take just three years to pay off the investment and would, over the life of a vehicle, save about $2,800 though better gas mileage, the president said.

*The justices of the U.S. Supremem Court said Monday they will consider a constitutional challenge to the 2002 Sarbanes-Oxley law from pro-business conservatives, who complained that the board established to oversee the accounting industry violates the constitutionally mandated separation of powers.

Market Analysis




















This is a chart of the CBOE Volatility Index or VIX which is often referred to as the fear index, as it represents one measure of stock investors' expectation of volatility over the next 30 day period. A high value for VIX represents higher volatility in the market and vice versa.

VIX has been falling since October last year which means that the market sentiment has somewhat stabilised although economic fundamentals are still weak. Stock investors seem to feel that the economy will recover even though it is currently still in a recession.

VIX is currently at 32.63 which is at the higher end of its historical trading range of 20 to 30. Recently it has shown some strength with three consecutive days of finishing higher than open.

The MACD has finished above its trigger which is a bullish signal, however, from now on it will be interesting to see whether, it will continue to move upwards (meaning that investors expect higher market volatility), or it was simply a temporary move upwards and resume its downward trend.




















Next take a look at the chart of S&P 500 Index above.

The index has moved below its 20 day moving average which is bearish, however it is still above its 40 day moving average.

The MACD or blue line, has moved below its trigger or the red line and this is bearish. However it is still above 0.

Also the Slow Stochastic has moved below its trigger which is bearish and it is nearing the low end of its range.

So the S&P 500 Index is showing indications of a bearish phase in the market at the moment. However, it is not sure yet whether the market is at the beginning of a strong downtrend to reverse the rally experienced over the past two months or is just undergoing a temporary correction.

However, despite negative company earnings and weak economic fundamentals, overall, the stockmarket has been quite resilient and as the VIX shows, investors seem to be quite hopeful that eventually the U.S. and world economy will recover out of the current recession.


To learn more about trading, have a look at this book (click image):













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To appreciate beauty; to find the best in others; to leave the world a bit better whether by a healthy child, a garden patch or a redeemed social condition; to know even one life has breathed easier because you have lived. This is to have succeeded.

Ralph Waldo Emerson