Market Moves: A Tough Year for the Bulls
Email This Article
Print This Article
Digg This
Delicious
SubscribeMOST POPULAR ARTICLES
- Midday Action: May 12
- Closing Wrap-Up, May 9
- Ratio Directional Straddles for Increased Flexibility
- Interview Central: Mike Paulenoff, Part III
- Closing Wrap-Up, May 12
- Examining Automated Systems Trading
- Seven Essential Credentials of Successful Optionetics Students, Part VI
- Options Corner: Looking for the Heat in the Hot Sectors, Part III
- Becoming a Greek Geek
- Weekly Outlook, May 12
- Option Watch: An Option for China Mobile?
- Growth Stock Swing Option: May 1
- Ratio Directional Straddles for Increased Flexibility
- Seven Essential Credentials of Successful Optionetics Students, Part V
- Options Corner: Looking for the Heat in the Hot Sectors, Part II
- Options Corner: Looking for the Heat in Hot Sectors
- Seven Essential Credentials of Successful Optionetics Students, Part VI
- Options Corner: Looking for the Heat in the Hot Sectors, Part III
- Weekly Outlook, May 12
- Becoming a Greek Geek
- Tech World: Aflac Continues its Strong Earnings Growth Momentum
- Midday Action: May 13
- Growth Stock Swing Option: May 12
- Examining Automated Systems Trading
- Seven Essential Credentials of Successful Optionetics Students, Part VI
- Midday Action: May 12
- Weekly Outlook, May 12
- Economic Watchdog, May 9
- Interview Central: Mike Paulenoff, Part III
- Options Corner: Looking for the Heat in the Hot Sectors, Part III
SPONSORED LINKS
May 6, 2008
The bulls are having a tough year. Many factors have developed that are coinciding to keep the bulls in their pen. Economic and technical factors have quelled any potential bull runs. Among these bull-leashing factors are the state of the US economy, the high price of oil and other major commodities, the credit crunch, the real estate market, and a host of other predictable and surprising events. Yet the bulls want to run. They take every opportunity to move the markets upwards. Still, the bears have a fairly strong hold on any bullish momentum in the market. But I’m proud of the bulls for making the effort to “accentuate the positive” and keep aiming their sights high. This has given the bulls more than a few good days to run wild and free. However, today is proving to be controlled by the bears. Even a positive attitude could not help the bulls overcome record high oil prices. Let’s take a quick look around the market world.
The bulls were sleeping in the Asian markets on Tuesday, May 6, 2008. However, the Asian markets made a nice run at the beginning of the week on Monday, May 5th. China’s Shanghai index was the big winner in the region by gaining nearly 2 percent. The Hang Seng also made a nice showing though much lower than usually expected. The only loser in the region was India’s BSE index, which had a moderate loss. This is not a big surprise as inflation soars in this growing economy. India has already taken measures to curb inflation with a ban on trading in rice and wheat. The government is considering more extreme measures to control inflation and keep commodities prices affordable, particularly for food. Will it ban all futures trading? Stay tuned for more insight on this drastic step.
The European markets were controlled by the bears on Tuesday, May 6, 2008. The European Big Four Group faced strong downward pressure from the disappointing—or rather, miserable—company news from some of its giants in the financial sector. Switzerland’s SMI index was the big loser in the region after major financials, including UBS Ag (UBS) announced not-so-great earnings. Swiss Re also announced serious credit-market losses. UBS announced that it will cut 5,000 jobs as a result of its losses. While that hurts many individuals, it usually causes the stock price to rise. However, the stock price fell nearly 2 percent. London’s FTSE was flat, but also faced bearish pressure from the financial sector, particularly Lloyd’s TSB (LYG). The DAX and CAC lost 0.36 percent by the end of the trading day. Lest you want to blame the banks for the bearish control, think again. Record high oil prices are the biggest and strongest factors affecting the market on this trading day. And that is true on both sides of the Atlantic.
Back in the US, the bears are in control of this market. The soaring prices of oil, the sinking value of the US Dollar, and the pearls of wisdom from the Fed chairman about the number of foreclosures have combined to drive the market away from 13K territory. What more can we expect? This week the data is rather light. But the news is driving the market. And, of course, we cannot ignore the technical data any longer. Let’s go straight to the economic news.
Economic Reports
This first full week of May started with the release of the Non-manufacturing (Services) Survey. The services sector is often overlooked, but it accounts for approximately 80 percent of this economy. Most industrialized countries have a large services sector, yet the vast majority of people neglect its importance in favor of the manufacturing sector. Of course, manufacturing is very important. The Institute for Supply Management released its manufacturing figure for April last week. This week the ISM released the services figure. This higher-than-expected figure surprised many analysts and the market as well.
Later this week, we have the Productivity figure. This quarterly report measures the output and efficiency of workers who produce goods and services. Ho hum, right? Wrong! Productivity is the one thing that can make an economy expand without the risk of inflation. It helps workers both domestically and abroad. It is even good for individual households. Yet it is also overlooked and ignored though, admittedly, most people like growth. This figure of the first quarter is expected show a slight decline to 0.8 percent, down from 0.9 percent for the fourth quarter. The bond market will likely be happy with this confirmation of slowed growth. However, the stock market and Dollar will be slightly disappointed and may react in such a way. This report will be released on Wednesday, May 7th at 8:30am.
That is the major report for the week. Next week, the housing data begins. The Housing Starts and Building Permits reports will be released. I don’t think that the market expects to receive any bullish boosts from these reports. Yet the market is always open to surprises and it could use some positive news from the housing sector. The bulls will probably fail to find any support from the economic reports coming next week. But perhaps the technical data will help. Let’s take a look!
Company News
Yes, the word is out. Microsoft Corporation (MSFT) is going to walk away from Yahoo Inc. (YHOO). Yahoo will hold its annual meeting soon at which time many investors could voice their frustration that the merger with the software giant did not materialize. Despite this frustration on the part of some investors, the price of Yahoo stock rose nearly 6 percent on Tuesday, May 6, 2008. Microsoft is also trading up in the 2 percent range. At midday trading, the Dow ($INDU) is trading flat after a bear-controlled morning. But the bullish momentum is rising as the bulls are getting over their high-price-of-oil shock and getting on to business. Didn’t I say that the bulls are models for maintaining a positive outlook even in the face of adversity and the threat of defeat?
What is helping the bulls to keep moving upwards? Some analysts report that the technical data is the prize on which the bulls have set their eyes. Let’s take a look at the chart below.
Figure 1: Dow Daily Candlestick Chart. This chart shows the struggle between the bulls and the bears. It is a constant tension between the two factions. Resistance shows strength by the bears. Support shows strength by the bulls. While the bears are showing strong resistance, the bulls are continuing to push up the value of the stock index. The latest candlestick (in red) could suggest that the bulls are weakening, but we will need to see how the day closes on Tuesday, May 6th. The rising bullish momentum shown at the bottom in red is a strong indicator that the battle is far from over.
Well, the bears might have the falling dollar and weak housing market on their side, but the bulls are not alone. The charts show that the bulls have friends and allies that can step in and provide some support. Whether it comes from an obscure but strong economic report or an abandoned merger, the bulls are in this fight for good. Let the red flags wave!
Market Moves Wisdom of the Week
Accentuate the positive! The bulls are not the only ones who can be positive in the face of adversity. The market will always show signs of difficulties. These difficulties can be so great that many analysts and traders will characterize the market as a loser. But traders need to look beyond the obvious and find the positive in the midst of all the negatives. The market always presents good trading opportunities. They simply need to be found. So the Market Moves Wisdom of the Week is to find the trading opportunities in the market and grab them quickly. This ability to see the opportunities will help to make your trading account even more positive!
Robin Lofton
Staff Writer and Trading Strategist
Profit Strategies.com
© Copyright 1995-2008 Optionetics. All rights reserved. This material is for personal use only. Republication and re-dissemination, including posting to newsgroups, is expressly prohibited without the prior written consent of Optionetics. Optionetics is a registered trademark of Optionetics, Inc.