US indices Consolidate As The market Awaits The Presidential Elections
US indices started the week in a neutral position without any significant changes. The session was calm as there was not any essential news during the day that could move the market. The only significant fundamental data was the ISM Manufacturing index report which showed a drop to 38.9, while the expected decline was to 42.0. This is the lowest level of the indicator since 1982 and suggests contraction in manufacturing and the overall economy. Separately, the Federal Reserve reported that the banks have tightened their loans standards in the past three months. The main reason is not the freezing credit markets but the fears about a weakening economy. The lack of activity among the investors was due to remaining less than 24 hours to the US President Election day. The market awaits the results of the race between the Democrat Barack Obama and the Republican John McCain, which will probably bring some volatility in the following days.
In corporate, JP Morgan upgraded Wal- Mart’s shares from Neutral to Overweight, while Boeing Corp was added to the Conviction Sell list at Goldman Sachs. The stocks of the world’s largest retailer rose by 0.3% to $55.97, while those of the aircraft maker managed to add 0.8% to $52.85.
General Motors Corp and Ford Motors Co reported 45% and 30% drop in total vehicle sales for the previous month as a result of the deteriorating conditions of the market due to the credit crisis. The shares of the two automakers fell by 2.4% to $5.65 and 2.7% to $2.13 respectively.
Among the advancers were the telecommunication companies AT&T Inc and Verizon Communications Inc, as their shares gained 3.9% to $27.81 and 3.6% to $30.75 respectively.
In a light trading volume session all the three indices closed almost unchanged.
Dow Jones Industrial Average fell by 0.1% to 9319.83, S&P500 declined by 0.3% to 966.38 and Nasdaq Composite was up by 0.3% to 1726.33.
Trading volume on NYSE was 1 billion shares, with a ratio advancers/decliners 9 to 7, and volume on Nasdaq as 1.8 billion shares, with a ratio advancers/decliners 5 to 4.
TECHNICAL OVERVIEW
S&P 500 – USA
The short term picture remains unchanged as S&P500 continues its narrow range consolidation near the resistance at 985, which crosses the 26-day SMA. If broken successfully, next targets will be the resistances at 1050 and the key 1080, which is 61.8% retracement of the 768-1576 rise. Despite the upward movement has resumed, it is too early to consider that the index has reached a mid-term bottom at 840, and while it stays below the key 1080, the downside risk remains and we may witness new declines. On the downside support is seen at the psychological 900, followed by 840 and 800.
S&P 500 – USA (chart, table)
DAX 30 – Germany
The short term picture remains unchanged as DAX consolidates near the resistance level at 5050, which crosses the 26-day SMA. The first target on the upside is the key resistance level at 5240, which is 38.2% retracement of the 7229-4012 drop. Its test will probably fail, but if broken successfully, next target will be the resistance at 5620, which is 50% retracement of the mentioned drop, followed by the psychological 6000, which is also 61.8% Fibo retracement. Although the oscillators indicate a bullish divergence, which is a possible signal that a mid-term bottom has been reached, it’s too early to consider that the uptrend has resumed until the index stays below 6000. On the downside support is seen at 4770, followed by 4500 and 4300.
DAX 30 – Germany (chart, table)
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04.11.2008 Stock Market Daily report.pdf, 489 Kb
