US Market Analysis -- 6th Oct 08

DJI closed 10,325.38 for the week ended 3rd Oct 08, down 817.75 points or 7.34% from previous week.
Nasdaq closed 1,947.39 for the week ended 3rd Oct 08, down 235.95 points or 10.81% from previous week.
S&P500 closed 1,099.23 for the week ended 3rd Oct 08, down 113.78 points or 9.,38% from previous week.
Crude oil price finished the week at US$93.22/barrel as compared with previous week of US$106.96/barrel.

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

1. 29th Sep 08, Personal Income reported 0.5% with market consensus 0.2% and previous value of -0.7%. Consumer Spending reported 0.0% with market expecting 0.2% and previous value of 0.2%.
2. 30th Sep 08, Consumer Confidence reported 59.8 with market expecting 55.0 and previous value of 56.9.
   
3. 1st Oct 08, Construction Spending came in 0.0% with market consensus -0.5% and previous value of -0.6%.
   
4. 1st Oct 08, ISM Mfg Index came in 43.5, previous value of 49.9 and market consensus 49.5.
5. 2nd Oct 08, ECB maintained its interest rate at 4.25%.
6. 2nd Oct 08, Jobless Claims reported 497K, market expecting 475K and previous value of 493K.
7. 3rd Oct 08, Nonfarm payrolls reported -159,000 with market expecting -100,000 and previous value of -64,000. Unemployment rate reported 6.1% with market expecting 6.1% and previous value of 6.1%.
8. 3rd Oct 08, ISM Non-Mfg Survey came in 50.2 with market consensus 50.0 and previous value of 50.6.
   

Economic data/events for the coming week is as followed

1. 7th Oct 08, FOMC minutes, Consumer Credit
   
2. 8th Oct 08, Pending Home Sales
3. 9th Oct 08, BOE announcement, Jobless Claims
4. 10th Oct 08, Import/Export Prices, International Trade

Wall Streets started the week when the House of Representatives rejected the bailout bill despite an urgent pleas from President Bush and it sent US markets crashing at least a 8% drop, sending shattering sentiments throughout the global markets. In the middle of the week, US Senators passed the revised bailout bill and managed to bring some calm to the US markets while investors still nervous and cautious while awaiting on the re-voting by the House of Representatives on Friday on the revised bailout bill. Markets were on a rally prior to the passing of the bill on Friday but as soon as news that the bill was passed, markets immediately undergo sell on news sentiment and making the US markets closing down for the week. Investors also weighing heavily on the economic data like unemployment rate maintain at a high rate of 6.1% and making investors worried about recession in US and how deep will it be if there is one.

Technically, the short-term, mid-term and long-term trend for DJI are down. DJI also breakdown from the 10,800 to 11,800 range and now 10,800 level has become the resistance. As of now, DJI is sitting at an immediate support at 10,300 but that look weak base on the indicators. DI+ and DI- are negatively spaced and while ADX signal is moving up, this indicates the downtrend might start to gather momentum. MACD signals are also moving down in the negative region, showing no sign of convergence at all. Stochastic signal failed to cut up for a rebound and now moving down towards the 20% level. However, RSI still able to maintain relatively flat around the 40% level and possibility suggesting that the downside should be limited in short-term. If the 10,300 level is unable to support, DJI might be looking at 9,000 level. Any relief rally, will be met with resistance at the 10,800 level and if that can clear, next resistance level should be the 50d EMA at 11,200.


The short, mid and long term trend for Nasdaq is down, with a resistance capped at 2,100 level and an immediate support at 1,940 level. DI+ and DI- are negatively spaced out and ADX signal is moving towards 40 level indicating the downtrend is gaining momentum. MACD signals are deeply in the negative region, no sign of convergence. Stocashtic signal has dropped below 20% into oversold region. However, RSI still able to maintain above the 30% level probably suggesting the downside could be limited in short-term. Any relief rebound would be capped at 2,100 level whereas potential downside could be 1,800 if 1,900 could not hold.


Technically, short, mid to long term trend for S&P500 are all down. The DI+ and DI- signals are negatively spaced and with ADX signal moving up towards 40 level, this could signal the downtrend is gaining in momentum. MACD signals fell to deeply negative region and no sign of reversal yet. Stochastic signals have dipped into oversold region. However, RSI still able to maintain above 30% level probably indicating short-term downside is limited. S&P500 currently is supporting around the 1,100 level with a resistance at the 1,170 level. If 1,100 failed to hold, potentially, it could fall to 1,000 level.


Despite passing the revised bailout bill by the House of Representatives on last Friday, US markets still close down for the week. The bailout plan is just a temporary measure perhaps supporting the money markets and not an absolute solution to the financial crisis caused by the sub-prime. People are concerning about whether US will go into recession and if does, how deep will it be. With the bailout plan already approved, investors should be not looking at all the economic data to determine the health of US economy. The volatility of the security market will still be there and dictating by the economic data. However, as the stock value getting cheaper, this might attract more private investors like Warren Buffett to start investing in valuable companies.