Day Trading Economic News Analysis: April 1, 2010

S&P 500 Pivots

As we have discussed yesterday the market will go higher if the S&P 500 trades above the 1172 and 1174 levels and will find support between 1167 and 1168. The market traded between 1175 and 1166 indicating that the market is consolidating before finding direction.

We have discussed that the 1168 is a major support level due to the convergence of various Fibonacci levels on March 25th. On the S&P trend on the daily chart has been consistently upward afterward breaking through the 1140 resistance level in early March.

Today marks the first day of the second quarter. Today's primary pivot is 1169.92 so expect the market to go higher if it trades above the 1172 and 1174 levels and it will find support between 1167 and 1168.

Commodities Analysis: Gold and Crude

Gold has been creeping upward slowly regaining the losses from last Wednesday's $15 decline. Gold imports are up in India ahead of the one million weddings planned between April and May. On the daily chart gold has been trending sideways since it reached a high of 1220 back in early December 2009.

Two weeks ago OPEC cartel announced that it will keep oil output ceiling unchanged as it will keep its profit from the falling dollar. Oil was currently trading between the $80 and $81 however it has regained its footing from the previous week of $82 reinforcing OPEC's decision of keeping oil output the same. Crude oil jumped to 84.49. The dollar losing ground played apart in pushing the commodities sector higher.

Forex Analysis: Dollar Vs Euro

The dollar is declining as the European manufacturing sector is picking up pace with the global economy. GE is investing 340 million euros ($460 million) to expand European wind operations. Companies buying into foreign currencies for purchases and investing increase the demand towards that country's currency.

Thursday Economic Numbers

US stock markets will be closed due to Good Friday however banks and bond markets will be open. Today's numbers include motor vehicle sales, jobless claims, ISM manufacturing index, construction spending, and the natural gas report.

March Motor Vehicle Sales

Last month February motor vehicle sales slightly declined to 7.6 million from January motor vehicle sales declined of 7.9 million. Motor Vehicle Sales is an indication of consumer spending and confidence accounting for 20% of total monthly retail sales. Since most consumers borrow money to purchase the vehicles, the decrease in consumer spending could mean lower consumer confidence and negative economic conditions. The slight weakness is due to heavy snowstorms and February having fewer selling days than January.

These purchases are interest rate sensitive influencing both the stock and bond markets. The stock and bond market have an inverse relationship with one another.

-          Low interest rates fuels higher vehicle sales. Strong vehicle sales mean higher corporate profits and higher stock prices. Higher sales could mean inflationary pressures maybe rising and eroding the purchasing power of the bond market.

-          High interest rates as well as credit crunches and recessions would lead to poor vehicle sales. Corporate profits will be diminished leading to a lower stock market and powering the bond market.

Equities to watch on these sales numbers include: Automakers, Auto and Trucking Part dealers, Steel stocks and other commodities used for the purpose of producing vehicles.

Jobless Claims

Last week showed positive signs in the labor market as jobless claims fell 442k for the week. This week jobless claims fell to 439k and the stock market will react to the positive news. Today CareerBuilder.com provided a sense of optimism as the number of job listings increased.

March ISM Manufacturing Index

The ISM manufacturing index has been growing consistently for the past 6 months however eased back in February to 56.3. January increased to 58.4 compared to 55.9 for December 2009.  The value of the index is measured between 0 and 100. A value over 50 tends to indicate economic growth through healthy corporate profits and higher stock prices. A value below 50 indicates an economic recession leading to steady or lower interest rates and rallying the bond market.

The material sector will likely get a boost as manufacturer's demand for raw materials increases when there is higher than expected ISM manufacturing index. This sector includes raw materials such as chemical manufacturing, paper, gold, silver, steel, and other metal mining stocks.  What needs to follow is the supply side from higher durable and non-durable goods numbers, and factory orders. So far those numbers have been gaining momentum pushing for positive upside within the manufacturing sector.

Some of the stocks to watch within this sector include: Gold, Oil, and Utilities. These stocks will trend lower when ISM manufacturing takes a dip. The strength of the dollar will also affect these stocks as it has an inverse relationship to commodities. As the dollar grows stronger expect these commodity stocks to trend lower.

February Construction Spending

Last month the construction sector continues to be in recession as tight credit and high vacancy rates plague the sector.  However January construction spending increased to M/M -0.6% versus -1.2% in December. Equities to watch on these numbers include: Construction equipment, raw materials and commodities used for building purposes.

Construction Spending indicates demand for expansion within the economy. A major portion of the spending is brought by government spending for infrastructure. The other components include residential and non-residential construction. Both these numbers dipped due to bad weather in December.

The construction sector continues to be in recession as tight credit and high vacancy rates plague the sector.  Equities to watch on these numbers include: Construction equipment, raw materials and commodities used for building purposes. However this sector got a boost today with higher than expected ISM manufacturing index. Stocks to watch last month was Caterpillar and Deere which are both near the same levels as last month approaching their respective 52 week highs.

Natural Gas Report

Last week the natural gas reported a slightly higher-than-expected 11 billion cubic feet for the March 19 week. Growing economic activity usually would higher the demand for natural gas.

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