21 Year Anniversary
October 20th, 2008 by Antony Ganzitti
Closing Data
| current | change | % | |
|---|---|---|---|
| Dow Jones | 8852.22 | -127.04 | -1.4% |
| NASDAQ | 1711.29 | -6.42 | -0.4% |
| S P 500 | 940.55 | -5.88 | -0.6% |
| FTSE 100 | 4063 | 201.6 | 5.2% |
| Nikkei 225 | 8693.82 | 235.37 | 2.8% |
| SPI Futures | 4105 | 54 | 1.3% |
| All Ords | 3944.8 | 43.3 | -1.1% |
| Oil | 71.9 | 2.09 | 3.0% |
| Gold | 787.7 | -16.8 | -2.1% |
| Silver | 9.335 | -0.3 | -3.1% |
| Aluminium | 2104 | -6.5 | -0.3% |
| Copper | 4701 | -179 | -3.7% |
| Lead | 1326 | -114 | -7.9% |
| Nickel | 10335 | -1095 | -9.6% |
| Tin | 13300 | -555 | -4.0% |
| Zinc | 1115.5 | -88 | -7.3% |
21 Year Anniversary
Yesterday marked the 21 year anniversary of the 1987 stock market crash, the day which the Dow Jones index fell a record 22.6%, its largest one day percentage decline ever. Currently the Dow is down about 38% from its record high set a little over a year ago. It is an important week for Wall Street as a barrage of earnings reports will be in the spotlight.
Stock investors will pay close attention to company guidance that comes out of the earning season, as they seek to evaluate how long this current downturn will affect revenues, and just how much profits are likely to be affected by changed future growth expectations. Among the biggest stocks reporting this week are Caterpillar, 3M, Boeing, McDonald’s, Apple, Yahoo, Amazon, and Microsoft.
Even though eyes will be fixed on company earnings, attention will still be paid to short-term credit markets to gauge whether recent moves by central banks around the world to stimulate lending have started working. Major money market rates fell slightly on Friday with overnight borrowing costs for dollars, euros and sterling funds all easing. Longer-term borrowing rates however have remained high.
An interesting thing to note is the VIX or the Chicago Board Options Exchange Volatility Index, which traded at record levels last week, as markets continued to swing in extremely wide ranges. Volatility comes in minor outbursts and it very rarely lasts for too long. Keep an eye on this index for clues of a stabilisation in not just volatility but also stock market indices.
Locally, keep an eye out for NAB which reports full year results on Tuesday. It will be interesting to see whether there are any more skeletons in the closet in relation to their investments in both the US and UK. ANZ shareholders also note that the company will be reporting Thursday.
Last week we talked about certain Gann cycles in the market, this week we have a Fibonacci cycle being the 21 year anniversary of the 1987 crash. Fibonacci followers will note the significance of the number 21.
A quick bit of analysis on the XJO/ASX200 chart. The daily chart is yet to confirm any new bullish activity, however the weekly chart below alerts us to a few interesting technical formations. Note the inside bar that was formed last week (inside bars are some of the most important in technical analysis), and the actual shape of this bar. Obviously looking at it, we can clearly see a rejection from the highs earlier in the week, and the market opened and closed at low levels. While this bar may look intimidating in that it shows a solid rejection of higher prices, I have seen time and time again such bars which occur at bottoms of downtrends, which actually mark an EXHAUSTION IN SELLING PRESSURE, i.e. sellers have had one final chance to sell down stocks and keep prices low, after which selling has dried up, and the market is in disequilibrium at present levels.
What does this mean?? Keep your eyes glued on the XJO daily chart, which will give us clues for any bullish price action which may develop.
One more chart which I found deserved some attention from traders and investors is STO Santos. We advised months ago for investors to abandon oil and gas stocks, as we felt prices had risen too far too fast. STO has retreated quite heavily in price over the last few months, from a high of 2234 in June down to its current price of 1043. An important level is found on the price chart between 940-980, as this was a level from which the stock started an explosive upward trend from early 2007.
Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.
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