Thursday, September 24, 2009

Evening Briefing for September 24th

* MARKET THEMES FROM THURSDAY: We opened the day in a multiday trading range, but broke to the downside on significant volume following a weak housing report. There was significant strengthening in the U.S. dollar, which helped push commodities and Treasury yields significantly lower. New 20-day lows expanded to 365, with only 584 20-day highs; my Demand/Supply measure was heavily skewed toward Supply, meaning that a large number of stocks closed below the volatility envelopes surrounding their short-term moving averages. That often leads to follow through weakness on a short-term basis, followed by reversal. As usual, I will be tracking the indicators each morning before the market open via Twitter (follow here) to gauge whether we are seeing expanded weakness or a drying up of selling.

* OVERSEAS/OVERNIGHT NUMBERS: 1:45 AM CT - France, GDP; 3 AM CT - EU, money supply; Italy, retail sales. Earnings reports due out on Friday can be found here.

* WORTH READING:

-- As households save, government goes deeper into debt;

-- Luxury hotels face potential default;

-- The dangers of being rewarded for doing the wrong things;

-- Reflections on whether this is a sucker's rally in stocks;

-- A look at the stock/dollar correlated trade.
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2 comments:

Chris said...

Stock investors reacted less to the housing report than to the Fed announcing that it will be scaling back two of its lending programs. The dollar surge on the idea that these liquidity programs would be scaled back. As a result, gold dropped hard, as did crude oil and stocks.

This move had little to do with the simultaneous housing report. Had stocks dropped on housing, the dollar would have further weakened on the thought that quantitative easing and stimulus would remain for the foreseeable future.

This is why a fundamental background is as important as technical analysis.

Keep pressing,
Chris Monoki

Brett Steenbarger, Ph.D. said...

Hi Chris,

Excellent point and analysis; thanks for passing along--

Brett