Testing S&P Support Level

by: Bill Cara

[Excerpted from Bill Cara's Daily Report]

Thursday was a day to test the support of the S&P 500 at 875, with an intra-day low of 879.61. This was a day that started badly for the Bulls as stocks dropped quickly as worries over possible credit rating downgrades of the US and UK debt left stock and bond investors edgy. Appropriately, the US Dollar continued its weakening, while Gold moved to higher highs.

At the close, for the fourth day in five, the DJIA (8,292.13 -129.91 -1.54%), S&P 500 (888.33 -15.14 -1.68%) and NASDAQ Composite (1,695.25 -32.59 -1.89%) all were down.

The Toronto Composite (9,949.59 -282.85 -2.76%) and Toronto Venture Board (1,089.85 +4.21 +0.39%) were headed in opposite directions as penny stock promoters increased the hype in hopes of raising cash before a possible market pull-back.

In NY, the Financial sector (XLF +0.2%) was the only one that lifted, albeit minimally. The losers were led by Industrials (NYSEARCA:XLI) and Energy (NYSEARCA:XLE), both down -3.0%.

Among industry groups, the Goldminers ($XAU +1.4%) were up a bit, which would have been more had not traders being throwing out the baby with the bathwater. Oil Services ($OSX -4.0%) and Big Oil ($XOI -2.2%) were among the leaders to the downside.

The Cara 100 company stocks that lifted the most were: Indian auto manufacturer Tata Motors (TTM +7.2%), Brazilian food processor Perdigao (PDA+5.7%), and a couple goldminers, again.

Earlier Friday, prices were, except for India, lower across the markets in Asia Pacific. Japan’s Nikkei 225 (9,225.8 -0.41%), Aussie All Ordinaries (3,755.4 -1.30%), Hong Kong Hang Seng (17,062.5 -0.80%), and Shanghai Composite (2,597.6 -0.50%) all took losses, but less than in the previous session. India’s BSE 30 (13,887.2 +1.10%) lifted. Later Friday in the European equity bourses, the French CAC (3,246.9 7:38AM ET +0.92%), German DAX (4,948.4 7:23AM ET +0.97%) and UK FTSE 100 (4,378.6 7:23AM ET +0.76%) were stronger, tracking the higher US equity futures Friday morning.

The US long Bond ($USB 120.33 -2.12 -1.74%) turned down again after a single rally day following three days of losses. The 30-year (4.313 +1.53 +3.68%), 10-year (3.353 +1.51 +4.72%), and 5-year (2.138 +1.03 +5.06%) all lifted as traders pondered the possible lowering of credit ratings of sovereign debt of the US and UK. Treasury bill yields (0.175 +0.05 +2.94%) were up a tad.

The $USD (80.55 -0.60 -0.74%) closed lower for the fourth straight day, breaking support at 81. The Yen (105.97 +0.59 +0.56%), and the Euro (139.02 +1.27 +0.92%), Pound (158.52 +1.00 +0.63%), and Cdn Loonie (88.09 +0.53 +0.61%) were all stronger against the USD.

Crude Oil ($WTIC 61.05 -0.99 -1.60%) pulled back to test support, despite a very weak $USD.

$GOLD futures, consistent with the falling $USD, lifted $35.20/oz over the past three days (953.50 +15.20 +1.62%).

Spot (cash) market prices earlier Friday were sticking to the higher futures, as follows: Gold (954.48 +2.93 +0.31% 07:18am ET), Palladium (231.0), Platinum (1149 -2 -0.17% 07:18am ET), and Silver (14.60 +0.13 +0.90% 07:18am ET).

Earlier Friday morning, the Euro futures were stronger (1.3969 +0.0081 +0.58% 07:08am ET). So too were the Crude Oil futures (61.60 +0.55 +0.90% 06:53am ET) stronger.

Stock futures for the DJIA were showing modest strength early Friday morning (8349 +54 +0.65% 07:08am ET). By 7:56am, the DJIA futures had softened a bit to +37.