Dow Jones Industrial Average Drops Below 10,000
May 27th, 2010 by Katy Loi
Closing Data
| Current | Change | % | |
|---|---|---|---|
| Dow Jones | 9,974.45 | -69.3 | -0.7% |
| NASDAQ | 2,195.88 | -15.07 | -0.7% |
| S P 500 | 1,067.95 | -6.08 | -0.6% |
| FTSE 100 | 5,038.08 | 97.4 | 2.0% |
| Nikkei 225 | 9,522.66 | 62.77 | 0.7% |
| ASX 200 | 4,307.20 | 41.9 | 1.0% |
| COMEX Gold - Dec 09 | 1,210.60 | 12.6 | 1.1% |
| COMEX Silver - Sep 09 | 18.345 | 0.564 | 3.2% |
| COMEX Copper - Sep 09 | 308.1 | 3.9 | 1.3% |
| WTI Spot | 71.65 | 2.9 | 4.2% |
| AUD-USD | 0.8218 | -0.0058 | -0.7% |
| Aluminium | 1,980.50 | -28.5 | -1.4% |
| Copper | 6,685.00 | -85.5 | -1.3% |
| Lead | 1,724.00 | -55 | -3.1% |
| Nickel | 21,145.00 | -450 | -2.1% |
| Tin | 17,350.00 | -355 | -2.0% |
| Zinc | 1,830.50 | -57.5 | -3.0% |
The Dow closed down 70 points at 9901 overnight retesting its low made a couple of days ago at 9800. There was uncertainty surrounding Chinese reports which suggest it may review its investments in European government bonds. China Investment Corp (the nation’s sovereign wealth fund) is considering reducing its allocation of assets to Europe.
Commodities were firmer overnight. Oil was up as reports revealed gains in oil consumption and orders for durable goods. Gold closed near its high and above its psychological and technical support level of $1200 an ounce. The gold market continues to be strong, spurred by safe-haven buying on uncertainty about the European Union debt crisis and on fresh worries about a military conflict between North Korea and South Korea.
On the domestic front, BHP and RIO both rose in London trading as Rudd’s government proposed changes to its mining profits tax. ADRs closed at $37.85, and $62.70 respectively. Australia may raise the lower limit for its proposed tax from 6 percent to 11 or 12 percent of company returns. Whilst it is a positive, there is still a lot to go between now and 2012 when the implementation may take place. Australian Resources Minister Martin Ferguson has said the government is open to refinements of the proposed tax. Rio remains cautious on the short-term market outlook with the European debt crisis and inflation in Asia posing potential risks. At its annual general meeting in Melbourne, Chairman Jan du Plessis said while Rio expects China's demand for iron ore, copper and aluminum will continue to grow over the next 15 years, it is cautious about the shorter term outlook. Rio has put all its capital spending projects in Australia under review since the tax
was announced. Tom Albanese (CEO) said the new impost would add another layer of complexity to investment decisions but can't say if tax will stop projects.
The SPI futures are pointing to a lower opening, down 23 points. Our market is holding above support at 4250 and has formed an uptrend on an hourly chart. We could see an initial sell off shaving around 40 points on open before bouncing on the back of firmer commodities, with resistance around 4300 and the last high of 4360. With expiry today, we expect many calls to finish out of the money. In which case, we look to sell June calls as soon as we can to reap the most from time value and lock in premium income. With volatility higher, (VIX up 1.2% overnight), it suggests premiums for June calls are relatively high. Whilst the market is consolidating and finding its feet at these levels, it is wise to remain consistent in the strategy and continue selling calls for income.
Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.
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