Tuesday, August 9, 2011

Wall Street Outlook: Dow Jones: All Eyes On Fed Tonight, 9-08-2011

Wall Street Recap: Dow Jones plunges 635 points or 5.5%, corrected 16% from peak
Despite pledges by G7 nations to stabilize financial markets after the U.S. credit rating downgrade, the Dow sank 5.5% (the largest drop since December 2008) to 10810 points amid heightening worries of double dip recession, worsening Europe’s credit crisis, perceptions that Washington is incapable of addressing the problems of rising debt and slowing growth.

The irrational selling pushed the volatility index up 50% to 48, the highest since Mar 09 and drove down the 10-year Treasury yield by 24 bps to 2.32%, the lowest since Jan 09. The Dow Jones has now corrected 16% from 52-wk high and 6.6% YTD.

Wall Street Outlook: Dow Jones: All eyes on Fed
With the economy being the focal point these days, the FOMC meeting tonight will come under greater scrutiny, as expectations for the policymakers to announce fresh economic stimulus initiatives, or at least prevent confidence from tanking further by
spelling out contingency plans should the world’s largest economy threaten to slip into a double-dip recession.

With no signs of divergence signals, the breach of 11000 psychological level and our envisaged 61.8% FR support at 10860 points are likely to exert more downside pressures for Dow Jones to retest 10500 and 10383 (76.4% FR), despite a heavily oversold market.

Relief rally targets are 11230 (lower Bollinger band) and 11994 (200-d SMA) levels.

Weekly Dow Jones Crucial Supports At 10000-10383 Points

Daily Dow Jones Shows More Downside As No Signs Of Divergence Signals Yet

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.


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