S&P 500 Index Analysis

Sept. 7, 2010

Analysis:

Today the market decided that it was time to take the profit accumulated over the previous four trading days, and it found a reason -- the European debt concern, which has been there since May, so the market gave up all its gains driven by the Employment Report last Friday. Looking ahead to tomorrow, the Beige Book will look ocher and will be devoid of any sanguine look the Bulls would like to see. Manufacturing activities continue to grow but at a decelerated pace that are unlikely to pick up the steam before year end, while the growth deceleration in the service sectors will be more pronounced. The less somber news will be that the housing sector has stabilized, not because buyers are eager to own their new digs, but because housing activities cannot be slower compared to already historical lows; however, any pick-up in the housing sector is not in the offing, as the inventory is bloated with foreclosed and short-sold houses. Most importantly, the employment situation remains dire, as businesses are cautious in their outlook for the next six months. As a result, the growth in retail sales will be limited.

The market will be reminded of the precarious state of the economy under "unusual uncertainty." As a result, the market will drop after the release of the Beige Book at 2 p.m. and close below 1,084 to set the stage for some congested trading in the 1,060-1,080 range in the next few trading sessions.

Strategy:

Hold short at 1,080

 

Sept. 8, 2010

Analysis:

Below are comparisons of the language in yesterday’s Analysis and in the Fed’s Beige Book:

Analysis: “Manufacturing activities continue to grow but at a decelerated pace.”
Beige Book: “Reports on manufacturing activity pointed to further expansion, although the pace of growth eased.”

Analysis: “The growth in retail sales will be limited.”
Beige Book: “Consumer spending appeared to increase on balance despite continued consumer caution that limited nonessential purchases.”

Today the market dropped after the release of the Beige Book but ended the day higher. Looking ahead to tomorrow, the trade deficit will likely surprise on the narrower side due to the strength of the US dollar in July, and the Initial Jobless Claims will also surprise on the lower side as they edge further towards 450,000. The market’s initial reactions will rise, but as the day goes on, the market’s lack of momentum to pull away from the congested 1,100-1,105 area will prompt profit-taking and send the market lower at close.

Strategy:
Hold short at 1,080

 

Dr. Chen where are your stop and target for this trade?

 

Looks like no stop loss.

 

Optionpro007,

I will incorporate an answer to your question in today's Analysis later. Thanks.

Dr. Chen

 

Sept. 9, 2010

Analysis:

Yesterday’s Analysis predicted that “the trade deficit will likely surprise on the narrower side,” and “the Initial Jobless Claims will also surprise on the lower side as they edge further towards 450,000.” Today the trade deficit did come in lower than forecast, and the Initial Jobless Claims came out as 451,000.

Yesterday’s Analysis predicted that “the market’s initial reactions will rise, but as the day goes on, the market’s lack of momentum to pull away from the congested 1,100-1,105 area will prompt profit-taking.” Today after the open the market did rise to as high as 1,110 but could not hold above 1,105 and closed at 1,104, ostensibly due to the concern about Deutsche Bank’s capital sufficiency.

Looking ahead to tomorrow, to borrow the language of the Analysis of Aug. 31, “the Bears should feel tired, as the market stubbornly refused to follow any prodding to plunge below 1,040,” the Bulls should feel tired, as the market stubbornly refused to follow any prodding to soar beyond 1,105. The market will find a reason to drop, and the reason most likely will come from Europe.

Strategy:

Hold short at 1,080 and stop loss if the market closes above 1,108

 

Sept. 10, 2010

Analysis:

After much wrangling between the Bulls and Bears, the Bulls prevailed on the backdrop of a promising wholesale inventory report and proved yesterday's Analysis wrong. Looking ahead to next week, the market clearly has turned bullish, as it would focus on any positive economic news to rise regardless of the fundamentals. There will be an opportunity to get on the short side again as the market continues to rise. Next week's economic news will not be consistent in one direction, and a confluence of information offering diverging indications of the economic conditions makes the Analysis' prediction next week more challenging than before.

Strategy:

Offset short at 1,109.50 for a loss of 29.50

 

Maybe you should look at this?

http://www.forexfactory.com/calendar.php

 

I don't mean to be rude but I think your Analysis is kicking you in the Ass.

 

Optionpro007,

You are not rude. You are being frank.

In fact, it is only fair for one to pay the price of being wrong, the price tag being given to but not chosen by him.

Dr. Chen