Commentary posted 30-Mar-2008 at 10:00 CT
Friday's Action:
Weakness seeped deeper into the market as the day progressed, however, many experts feel that the market is ready to begin a slow turnaround as March nears an ugly end. Major overseas markets have posted mostly lower results for Friday. London's FTSE was down 0.43%, Frankfurt's DAX closed down 0.28%, and Paris' CAC finished down 0.50% today. Japan's Nikkei was up 1.71%; Hong Kong's Hang Seng closed up 2.74%, and Sydney's All Ordinaries Index finished down 0.32%. Market breadth was negative with NYSE declining issues over advancing issues by 1.99, and down volume over up volume by 3.21; Nasdaq declining issues over advancing issues by 1.79, and down volume over up volume by 4.02. Leading sectors were Paper, +0.15% and Hospitals, +0.05%. Laggards were Broker Dealers, -2.71% and Retailers, -2.67%. Nasdaq 100 futures closed -12.00 pts lower to settle at 1780.00, while the S&P's settled -10.90 pts lower at 1318.90.Weekly Recap:
The week began on an upbeat note but then it was pretty much all downhill from there, notwithstanding a slight gain on Tuesday for the S&P 500.The National Association of Realtors reported that sales by homeowners rose 2.9% in February to a seasonally adjusted annual pace of 5.03 million, up from January's reading of 4.89 million. It was the first month-over-month rise of the annualized pace since July.
Consumer confidence sank to a five-year low as tight credit markets, rising prices and worsening job prospects made many worry that the economy is falling into recession. The Conference Board, a business-backed research group, said Tuesday that its index of consumer confidence plunged to 64.5 in March from a revised 76.4 in February.
Durable goods orders declined 1.7% in February to $210.6 billion. The weakness was mainly due to softness in machinery orders, which declined 13.3%. Excluding transportation, new orders for big-ticket items were down 2.6%. Non-defense capital goods orders, excluding aircraft, an important measure of capital spending, fell 2.6% in February. Shipments of this category declined 0.4%.
The revised Q4 GDP report showed that the economy expanded at an annual rate of 0.6%. In the third quarter, GDP growth was 4.9%. The slowdown in Q4 growth was due to a downturn in inventory investment and decelerations in export, PCE and federal government spending. On a year-over-year basis, GDP growth was 2.5% in the fourth quarter, slower than the 2.8% growth in the previous quarter.
Personal income rose 0.5% in February, better than the expected increase of 0.3%. Meanwhile, personal outlays on the purchases of durable as well as non-durable goods and services increased 0.1%, which however was a slower rate of increase than the 0.2% growth expected by economists.
For the week, the Dow LOST -1.2%, the S&P 500 was -1.1% LOWER, while the Nasdaq finished up +0.1%. The small cap Russell 2000 gained +0.3%. Next week, the most important events are Fed Chairman Bernanke's testimony on the economic outlook before the Joint Economic Committee on Wednesday, the March employment report on Friday, and the ISM Index and ISM Services Index for March on Tuesday and Thursday, respectively.
The COT Report:
The latest Commitments of Traders report from the CFTC shows that Commercial Hedgers bought 29,069 S&P 500 futures contracts last week to bring their net long position to 12,612 contracts. Large traders were net short -14,784 contracts, with Small Traders net long the remaining 2,172, the so-called "weak hands". For the Nasdaq 100 futures, Commercials bought 11,668 contracts last week to bring their net long position to 5,492 contracts. Small Traders were net short -1,969 contracts in the Nasdaq. Commercial action in Dow futures saw the smart money sell 4,722 contracts to bring their net short position to -5,183 contracts.Commercial Hedgers were better buyers in the S&P's last week, while Small Traders were better buyers a short term bearish sign. Commercials remain net short in two of the three index futures, and that has been an intermediate term bearish sign historically.
The Short Term Outlook; 1-5 Days:
The Hourly Charts:
The OEX RSI indicator is nearing oversold, suggesting a turnaround is near.
Futures Market Focus:
Crude futures slipped Friday, as investors' concerns about a supply disruption in Iraq began to dissipate. The Commerce Department's report of weak consumer spending also sparked some selling pressure in the oil pits, with fresh demand concerns replacing supply woes. By the close, May-dated crude shed $1.96, or nearly 2%, to settle at $105.62 per barrel.
Monday's Look-Ahead:
The 60-mn SPX chart below shows the StochRSI indicator in the BUY zone. For Monday, resistance for the S&P's comes in at 1326 and then 1334. Support lies at 1312 and then 1304.
Monday's Reports:
The Chicago PMI is due at 9:45 ET. Monday's earnings calendar can be found HERE.The Intermediate Term Outlook; 2-6 Weeks:
The weekly chart of the Dow showS the longer-term resistance-support line holding to the upside.