Morning Coffee, Saturday, 7 May, 2011

In America:

1. Dow Industrials +0.43% 
2. Dow Transports +0.32%
3. SP500 +0.38%
4. Russell 2000 +0.49%
5. Nasdaq100 +0.34%

Comment: After being down four days in a row, it's not surprising that the market had a positive day.  Friday was Jobs Report in America.  In a burst of relief/euphoria, the market gapped up strongly to be up over 1% - but saner minds then sold the market off as the Jobs Report was not as strong as first appeared.  Volume was low - the lowest in thirteen days on the SP500.  This looks like a low volume test of the upper limits - that's bearish.

The Materials Sector +0.82% and Energy Sector +0.44% were both up.   That's something of a plus for Australia.  But I wouldn't bet on it.  The Banking Sector was up modestly +0.2%.  Semi-conductors had a better day +0.75%.  

Europe:

1. France +1.33%
2. Germany 1.56%
3. London +0.96%

At the close, Europe was still under the influence of the initial euphoria generated by the Jobs Report.  America only fell away later in the trading sessions.

EWA (Australian Shares ETF traded on the New York Stock Exchange) +1.78%, The Australian Dollar was up 0.95% to finish at 106.87 - still well below the dizzy heights of the 110 region.  A strong Ozzie Dollar is needed to maintain the liquidity for a strong stock market.  Gold in Oz Dollars was up +0.52% in the past 24 hours.  That compares with a rise of about 1.5% in the price of Gold in U.S. Dollars.    

Technical Comment on the SP500:

1. The SP500 finished at 1340.2.  In a support zone but just under strong resistance.
2. The Index is below the 13-Day MA (negative) after rising above it in early trade.  
3. Above the 50-Day MA (positive).
4. The doji candlestick (open and close about the same) is usually taken as a sign of indecision.
5. Indicators:
• Slow Stochastic 60.9.  Below 80, below its signal line and falling.  Negative.
• The 13-Day MA is above the 50-Day MA.  Positive
• RSI now 53.1.  Above 50.  Positive.
• MACD Histogram marginally below Zero.  Neutral.  But falling. 
• CCI +37.2 and rising.    Neutral.

And the price of oil dropped again last nigh (-1.74%) - now well below 100 for West Texas.   Momentum to the downside is decelerating.

The action in America last night was disappointing from the bullish point of view.  The major indicators still have plenty of downside room to move.  I think there's more downside in the American market until the Stochastic gets to an oversold level.  

But - a doji is usually interpreted as indecisive.  So the action on Monday night might tell the story.

I think Australia will be up early on Monday - but possibly come off a bit after that.  A strong white candle on Monday would boost the bullish case and probably be a buy signal.

Good luck

Red