Wednesday, August 10, 2011

Market comments for Aug. 11, 2011 (UPDATE)

It's a big day for data release at 5:30am PST for Initial Jobless Claims. In addition, we broke below of 11,000 on the Dow. So far we have not held above 11,000 and so as each day goes by, one must conclude the market is at risk to test Dow 10,000 eventually.

From the Dow charts below, you will see we did rebound after the sharp decline and then the rebound followed by the retreat to a lower low. The Dow closed Wednesday at 10,719. The low for the day was at 10,686.

Volume was high again with a 520 point drop. If you look at the chart below, I took readings on volume for the Dow starting around 11:30am PST and recorded the reading of the Dow at the same time as I recorded the Volume. From the intraday Volume/Dow chart below it is clear that as Volume increased the Dow drop accelerated. So there was a lot of selling behind this market again Wednesday.

My expectation for Thursday is that if the Initial Jobless Claims shows a sharp increase to say 420K or more, the market may sell-off again! However, if the Initial Jobless claims come in at 400K or less, we may have a rally and retest the 11,000 level. Remember there is a predisposition for the market to decline rather than recover right now.

But let me be clear here, we are headed lower, as I have stated many time here, this past week. Just check my previous Blog posts for the last 7 days.

UPDATE: 5:31am PST Aug 11th

Of particular note this morning is that France's CAC 40 Index has slipped below 3,000 while Britain's FTSE is now below the important 5,000 level as we awaited our Initial Jobless Claims data. Our Nasdaq Index is getting to testing the 2,400 level as well, after its decline yesterday. All of these are major psychological levels for investors. Our Dow Futures have been down about 140 points since our premarket opened at 5:00am. Gold Futures Margin requirements have been raised by the CME (CME is the world's leading and most diverse derivatives marketplace).

The Initial Jobless Claims number came in at 395K for week ending 8/6. That's down 7,000 from the previous week. It is a better number, but only slightly. The question is now whether the market will rally on the news. Our Trade Deficit came in at $53.0 Billion in June compared to $50.8 in May.

And finally, leaders of the Senate and the House have selected their representatives to form the Committee, which is charged with the task to come up with Spending cuts and any revenue (tax) increases by November 23rd. Many point to the fact that none of these people chosen in the Senate were members of the Gang of Six, who worked for 10 months and came up with many recommendations for spending cuts and tax increases in a bipartisan way. They knew where the money was as they studied much detail in the budget numbers and were quite familiar with where to get the money from. So there doesn't look like much hope these members will come to an agreement in time.

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