US Market Analysis -- 29th Sep 08

DJI closed 11,143.13 for the week ended 26th Sep 08, down 245.3 points or 2.15% from previous week.
Nasdaq closed 2,183.34 for the week ended 26th Sep 08, down 90.56 points or 3.98% from previous week.
S&P500 closed 1,213.01 for the week ended 26th Sep 08, down 42.07 points or 3.35% from previous week.
Crude oil price finished the week at US$106.96/barrel as compared with previous week of US$102.73/barrel.

A recap of last week economic data/event is as followed.

1. 23rd Sep 08, State Street Investor Confidence Index reported 70.7 as compared with previous value of 77.2.
2. 24th Sep 08, Existing Home Sales came in 4.910M with market consensus 4.92M and a previous value of 5.000M.
   
3. 25th Sep 08, Durable Goods Orders reported -4.5%, previous value of 1.3% and market expecting -1.6%.
   
4. 25th Sep 08, Jobless Claims came in 493K, market consensus 445K and previous value of 455K.
5. 25th Sep 08, New Home Sales valued 460,000, market expecting 510,000 and prevous value of 515,000.
6. 26th Sep 08, 2Q08 GDP ( final revision ) reported 2.8% with market expecting 3.3% and previous revision of 3.3%.
7. 26th Sep 08, Consumer Sentiment came in 70.3 with a previous value of 63.0.
   

Economic data/events for the coming week is as followed

1. 29th Sep 08, Personal Income/Outlays
   
2. 30th Sep 08, Consumer Confidence
3. 1st Oct 08, Construction Spending, ISM Mfg Index
4. 2nd Oct 08, ECB Announcement, Jobless Claims, Factory Orders
5. 3rd Oct 08, Employment Situation, ISM Non-Mfg Survey.
   

For the whole week, Wall Streets was focused on the US Government US$700b rescue package. Doubts were raised about the amount, how it was raised, what help will be to homeowners and will it totally solved the financial crisis. There was also concern about whether the US Congress will approve of such a package. The concern caused US markets to fall in the early part of the week and as news that US Congress was near to approve of the package markets then rebound in the later part of the week.

Technically, DJI was still trading within the range of 10,800 to 11,800 and there isn't any sign that DJI could reverse the mid to long term downtrend. Short-term relief rally might be possible base on the indicators. DI- is cutting down and near touching DI+. However, the ADX signal still at the 20 level indicating any upside lacks the strength. MACD signals touched, about the cut up and so does the MACD histogram which is almost flat at the zero line. Stochastic has already cut up and staying around the 50% level and RSI still above the 30% level. These potentially indicate DJI is in flavor of an upside than the downside. A relief rally or rebound could be capped at the 11,800 level whereas immediate support is at 10,800. A breakdown of the 10,800 level would probably fall lower to re-test the recent low at 10,400 level.


Nasdaq traded within the range of 2,150 to 2,200 for most part of the week. In mid to long term, there has not been any sign of a trend revseral and any rebound or rally is just short-term. The DI- and DI+ in the ADX chart still widely spaced apart and no sign of crossing over. On the other hand, MACD signals touched and about the converge with MACD histogram near the zero line. Stochastic signal has cut up and moving upward towards the 50% level and RSI is still above the 30% level. These indicators potentially point to a short-term upside which probably capped at the 50d EMA level of 2,283. Immediate support would be at 2,150 and if that breaks, it could drop to re-test the recent low of around the 2,067 level.


S&P500 was trading between the range of 1,180 to 1,220 for most part of the week. Like DJI and Nasdaq, the mid to long term trend is still down and no sign of reversal in sight. However, base on the indicators short-term rebound or relief rally is possible. In the ADX chart, the distance between DI+ and DI- is narrowing but yet to show sign of the DI+ cutting up to the DI-. MACD signals touched and about to converge up with MACD histogram near the zero line. Stochastic has cut up and at the 50% level. RSI still maintain above the 30% level. These indicators potentially indicating a short-term upside is more flavor than downside. Any upside could be capped at the 50d EMA level of 1,250 with an immediate support at 1,180 level. If that support breaks, it could drop further to re-test the recent low of 1,134 level.


After some twist and turn about the US$700b rescue package approval, the main focus for the week ahead will still be on it and the status of any banks. The rescue package is supposed to get approved over the weekend. Failure to approve the rescue package would definitely send fear to the markets about the US economy being into recession and hence markets would react badly to it. However, the approval of the rescue package could only bring short-term relief to the markets as the sub-prime financial crisis is still far from being over.