US STOCKS RETREAT FROM EARLY GAINS. FINANCIALS TURN SOUTH ON PROFIT TAKING, FOMC MINUTES
US EQUITIES suffered a late day selloff on Wednesday after the release of the US FOMC (Federal Open Market Committee) minutes communicated a downward revision to growth figures, fueling speculation that the current recession is likely to drag on well into 2010. Sentiment in the financial sector turned negative as ongoing progress of the US bill to overhaul credit card terms overcame the early rally fueled by the well received stock issue offering by Bank of America. Overall BOA rise was seen as somewhat of an anomaly compared to the tentative gains achieved by other banking institutions. New levels of volatility entered the sector as individual positions regarding the payback of TARP funds have been established in the last few sessions.
The pullback in financials won out over another day of strong gains in the energy and material sectors. Both were fueled by a weakening US Dollar, which often boosts commodity prices, and the weekly EIA inventory reports for crude oil. The report showed that crude oil and RBOB gasoline both experienced stronger than expected drawdown in supplies ahead of the long Memorial Day weekend- the unofficial start of the summer travel season. At these levels, it appears that higher energy prices are offering support to the equity markets (remember when they were enemies?). Perhaps the higher energy prices are being supported for the time being by the powers that be in order to spur buying interest in cash rich sectors that could reopen the notion of investing rather than trading. But since trading is the nature of the business here, the key is to find the elements that create support, resistance and price movement. Technology stocks ended mixed as computer makers came under pressure from disappointing earnings from Hewlett Packard. However Analog Devices posted better than expected earnings, lending support to the chip sector. Volume again was low, alluding to the beginning of the summer doldrums.
Technically, June Dow Futures will again be hard to measure due to the low volume. Near term support sets up at 8287. Resistance for the channel sets up at 8553. Any potential breakout movements will need to be measured against volume to determine a viable contribution to trend action.
DJM9 (JUNE DOW)
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