Mercaforex, Wall Street Goes Bearish


Master Trader
Jun 7, 2009
By Mercaforex

During Thursday’s trading session, the U.S. dollar experienced mix results, as it advanced in early trading session, but towards the end of the trading day U.S. dollar direction reversed and lost ground against the major currencies. Yesterday, as we forecasted, the U.S. stock market started the trading session with a bearish trend, but when the day advanced, Wall Street recovered and reached small gains. In this sense, the U.S. Dow Jones Index advanced 0.39% marking a new year high and its eighth trading session saw an improvement, as main financial shares and Boeing´s shares marked interesting profits. The Dow Jones gained 37.11 points and finished the day at 9.580,63 units. The U.S. S&P 500 advanced 0.28%, and closed at 1.030,98 units, while the NASDAQ, which represents the main American companies in the field of technology and internet, advanced 0.16 % and closed at 2.027,73 units. These developments showed the volatile and unclear direction that is dominating the U.S. stock market, mainly due to the summer holidays that results in lower trading volume. Wall Street reverted its trend and finished the trading session with small gains as investors reacted with optimism after the preliminary American GDP numbers and the Unemployment’s Claims numbers came in better than expected. This way the Preliminary GDP numbers, which determine the total worth of all goods and services produced by the economy showed a number of -1.0%, when was forecasted at -1.4%. The Weekly Unemployment Claims, which determines the amount of individuals who filed for unemployment insurance for the first time during the past week showed a number of 570K, while previous reading was 580K. In this sense investors welcomed this figures and risk appetite advanced. So we saw that Wall Street recovered while the U.S. dollar gave up previous gains against the majors.

As for today we are waiting the Personal Spending, which determines the total amount spent by consumers on goods and services and is forecasted at 0.3%, when previous reading was 0.4%. Also due for release is the Personal Income figure, which determines the total amount of income received by individuals and is forecasted to increase to 0.1%, with a previous reading of -1.3%. A rising trend will have a positive effect on the U.S. dollar, as higher levels of income allow consumers to spend more. Consumption is a key driver of the economy, accounting for about two-thirds of GDP. Finally the Revised UoM Consumer Sentiment is also expected, which determines consumer attitudes concerning both the present situation and future expectations and is forecasted at 64.6. It is important to mention that yesterday; Crude Oil Value started the trading session lower, as Wall Street was bearish at the opening. Nevertheless, as the day advanced, Wall Street made some gains, and so did the Crude Oil prices, reaching the 72,49 USD level, after two trading session that Crude Oil Value was bearish. This happened because the U.S. dollar fell sharply towards the end of the U.S trading session. Similarly, the Light Sweet Crude closed at 72,49 USD, gaining 1,06 USD after Wednesday’s trading session. After the bullish trend of the Crude Oil Value and Wall Street, optimism came back to the market. As for next week, traders should follow carefully the market developments because August summer holidays are nearing its end and trading volume should be back to normal. If the U.S economy does not show strong signs of recovery then the U.S. dollar will advance in the long term against the major currencies because investors will prefer to hold onto the safe haven currency.

During Thursday’s trading session, the Euro started the trading session losing ground against the U.S. dollar, as the main European stock markets retreated. Nevertheless, the Euro during the U.S. session, reverted its downtrend, and advanced against the U.S. dollar. These fluctuations that we observed on the Euro were definitely related to the Asia and Europe stock market developments, and also because of the bearish trend that we saw in the main European Stock markets. Some concerns were still arising in the marketplace regarding the worldwide economic recovery, and this way risk aversion came back to the market and the main Bourses in Europe retreated. In this sense, the British FTSE 100 lost 0.4%; the German DAX retreated 0.9%, and the French CAC-40 lost 0.5%. As the main European bourses retreated, so did the Euro. Nevertheless in the U.S. trading session, when Wall Street reverted its downtrend, the Dow Jones index advanced and this way the Euro advanced against the U.S. dollar, as investors preferred risky assets. Yesterday from Germany we saw the Consumer Climate indicator and showed a number of 3.7, below forecasted reading of 3.8. Also the German Consumer Price Index (CPI) was published and showed a reading of 0.2%. Nevertheless these readings did not succeed to boost the European stock markets. As for today there are no key indicators due for release from Europe, so the Euro trend against the U.S. dollar, once again, will be influenced by the U.S. Stock Market development and U.S. economic indicators.

The Sterling recovered and advanced against the U.S. dollar after yesterday’s trading session. Yesterday, from the U.K. was released the Nationwide HPI, which determines the monthly change in the average price for a house in the UK and showed a reading of 1.6%, well above forecasted number of 0.6%. Nevertheless, the Business Investment, which determines the total level of capital spending by all companies showed a number of -10.4%, below forecasted number of -3,6 %. These figures joined the Consumer Confidence with a reading of -25, when was forecasted at -24, and also the CBI Realized Sales which showed a reading of -16, below the forecasted reading -12 joined the party. These figures showed that the British economy has a difficult road to go through. This news resurfaced concerns regarding the worldwide economic recovery, and risk aversion came back to the market as the British stock market retreated. As for today we are waiting the Revised GDP numbers, which determines the total worth of all goods and services produced by the economy and is forecasted at -0.8%, same as previous reading. As it seems the Sterling managed to reverse its bearish trend against the U.S. dollar, but without doubt the Sterling will be under pressure again, as its economy is still surrounded by the dark recessionary cloud.

During yesterday’s trading session the Japanese Yen advanced against the U.S. dollar, maintaining its bullish trend against the greenback. The market movements were mainly driven again by the Shanghai Stock market developments and due to losses in the European markets, as concerns emerged again regarding the worldwide economic recovery, and risk aversion came back to the market. We saw that on the back of China’s announcement that it will reduce its investments in the manufacturing sector, the Asian Stock Markets went bearish, prompting the Japanese Yen value as a safe haven currency. Yesterday in Japan was released the Unemployment Rate figures, and showed a number of 5.7%, with a previous reading of 5.4%. In this sense concerns about the worldwide recovery continue despite Germany, France and Japan announcing that they are no longer in recession. This way investors take refuge in the Japanese Yen. On the other hand, Crude Oil prices after losing ground during last trading sessions, yesterday advanced and reached the 72.49 USD level, as finally in the U.S. trading session the U.S. dollar lost ground strongly. The relationship between Wall Street and the Crude Oil Barrel was clear enough during yesterday trading session. When Wall Street recovered so did the Crude Oil Value. Some instability we are watching on the stock market, and in case of a bearish trend in the stock markets, the Japanese Yen could be able to advance against the majors currencies. As for today will be a key factor to follow Wall Street developments and this way you should open trading positions with the Crude Oil.