Sunday, August 7, 2011

Wall Street Outlook: Dow Jones: All Eyes On FOMC Meeting On 9 August, 8-8-2011

Wall Street Recap: Dow Jones up 61 points on technical rebound
The Dow Jones rallied as much as 172 points following a better-than-expected July jobs data. However, the index nosedived from early gains to as low -245 points before ending +61 points at 11445 on speculation that an S&P downgrade of the U.S. was imminent, coupled with worries about further contagion in the euro zone debt crisis. The Dow ended -5.8% wow and -1.1% YTD.

As speculated, S&P downgraded U.S. credit rating to AA+ from triple A (since granting it in 1917) on concern about the government's budget deficit and rising debt burden. It also said that the outlook of the long term rating is "negative," indicating another downgrade was possible in the next 12 to 18 months.

Wall Street outlook: Dow Jones: All eyes on FOMC meeting on 9 August
Although not totally unexpected, the S&P downgrade is likely to have a knee-jerk reaction when Wall St reopens tonight. However, significant losses could be mitigated following the 5.8% weekly plunge and the 11.5% decline from 52-week high. The Doji formation also suggests potential of technical rebound.

Despite the cut, U.S. bonds are still seen as one of the safest investments in the world, reflected by strong demand as yield on the 10-year Treasury note fell to a low of 2.39% on 4 Aug from 2.8% on 29 Jul before ending at 2.57% on 5 Aug.

All eyes are turning to FOMC meeting on 9 Aug for guidance on whether the Fed is going to offer any meaningful solution to revive the sluggish economy. For Dow, the 1st major support is 11k psychological mark, followed by 10860 (61.8% FR from 12876 and 9614). A more solid support is situated at 10383 (76.4% FR). Relief rally targets are 11994 (200-d SMA) and 12250 (50-d SMA) levels

Daily Dow Jones Potential Technical Rebound Amid A Long-Legged Doji Like Candle Formation
DowJones08-08-2011

Weekly Dow Jones Crucial Supports Near 10860-11000
DowJones08-08-2011a


Source: StockCharts.com

1 comment:

  1. S&P has downgraded US debt, this has created panic in the markets, but the question is should we take S&P seriously when these credit rating agencies have proved that their understanding about economies is indeed poor.

    Remember, it is the same S&P that gave AAA rating to mortgage backed securities in 2005-2007 and we all know what happened after that, so I guess its time to be bullish when S&P, Goldman and the likes become bearish on the world.

    Please visit http://www.kalpeshmaniar.com for accurate forecasting

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