Swing Trading Strategies & Stock Picks Since 2003

Weekly Market Commentary- (Dec 07-Dec 11)

DJIA Industrial Average

Open: 10388.90

High: 10,516.47

Low: 10,207.29

Close: 10,471.50

Change: 82.60 (+0.8%)  

RSI: 57.94

MACD: 100.74

Strategy: The stock indices have been showing signs of tiring out and are not taking any fresh direction, and corrections are coming in the market at regular intervals soon after they record gains for two to three sessions. Traders should regularly book profits at higher levels.

Highlights of week:

·        The markets, remained firm for a major part of the week, and showed signs of inching up only on Friday, after the bulls and bears remained at loggerheads ahead of option expiry for rest of the week.

·        The Dow Industrial Average, which initially started on a volatile note, ended up with tiring out signals in the later half of the week, and recorded only small gains for the entire week.

·        In all, the Dow Industrial Average gained a small 82.6 points or around 0.8% in the entire week ended Dec 11.

·        In sharp contrast to DJIA, Nasdaq Composite Index reversed some of its earlier gains by paring close to 4 points, or 0.2% gains from its opening during the week, with most of the 10 components losing some momentum. However, the broad based S&P 500 index remained above crucial 1100 points support level for a major part of the week, and ended up almost flat at 1106 points.

·        Gold continued to weaken for a major part of the week, , to retrace to $1114 on Friday, following the strength shown by US $ against some global currencies.

·        The Dollar Index remained stable throughout the week, and recovered only on Thursday and Friday to close the week around 76.5.

·        The emerging economies continued to show strength in economic recovery according to November data released. While the China ended up November with a growth in production of over 19% on a year to year basis, India also followed on the same footprints, with a 10.3% growth in industrial index of production for last month.

·        Crude oil continued to remain weak throughout the week, and ended on a subdued note with prices of $68.5 per barrel.

The Weekly Commentary

The 0.8% made during the week recorded by DJIA to 10471.5 points, or 82.6 points, was largely led by a higher valuation gained by Time Warner, following the spin-off of AOL mid-way through the week.

Apart from same, the other stock to remain in action during the past week was 3M, which was upgraded by Citigroup’s investment research arm. The stock consequently made strong gains for three sessions.

Verizon Communications was yet another star that made a strong start to the week, and put on some weight even on Tuesday, when all other 29 Dow constituents ended up with losses.

Alcoa Inc. was yet another mining stock which came into limelight late in the week, as it almost moved towards a new breakout area. Apart from same, Yahoo Inc. also showed initial signals of strength on charts, as the stock breached past 20 day MA.

Financials sector stocks, including stocks like Bank of America failed to sustain at higher level, after the bank repaid the debts taken out of TARP funds. Citigroup, the other heavily traded bank, however, is still trying to negotiate with the FED for repayment of TARP, and ensure that the latter sells off its holdings in Citigroup. In absence of same, Citigroup may find it difficult to raise fresh funds.

The economic data dropping in the week largely remained encouraging; with the November retail sales growth of 1.3% beating all analysts’ expectations of 0.6% growth.

The continuing jobless data was also lower than the earlier weeks, thus giving some fillip to the markets. However, the initial jobless claims continued to be at the high end.

Gold  remained subdued for a major part of the week, as US $ gained after a long gap in the second half of the week, thus dragging the gold down to around $1115 on Friday from $1226 level just 10 days back.

Crude oil prices continued to remain depressed during the week and closed at $68.5 per barrel, as suspected inventory levels are still high.

The Week Ahead

Monday: No major economic data is due for release on Monday

Tuesday: Commencement of FOMC meeting

ICSC-Goldman Sachs store sales data

Producer price index

Industrial production data for November

Wednesday: FOMC meeting announcement

Consumer Price Index

Commencement of fresh housing construction in November

EIA Petroleum status and inventories report

Thursday: EIA Natural gas report

The Labor Department's weekly jobless claims report

Fed balance sheet

Friday:  No major economic reports are due for released