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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (40308)	11/2/2003 11:38:38 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 70981

Tradewinds by Chris Curran November 3, 2003 The December S&P 500 futures (SPZ and ESZ) turned in a solid performance last week, as market players bought equities and futures in anticipation of solid economic reports later in the week. And they turned out to be right, as Q3 GDP came in at 7.2%, which was the strongest quarterly gain since 1984. However, the equities and futures markets saw a "sell the news" scenario after it was released. Some pundits suggested that the GDP was backward looking, while others suggested that the news was already factored into stock prices. Either way, little traction was able to be made to the upside following the data. Another catalyst was a flurry of mergers with the largest being Bank of America - Fleet First Boston, which will create the 2nd-largest bank in the country. Mergers can prove to be a double-edged sword, however, as despite what the companies promise, layoffs usually follow. The overall gains for the week were done on heavy volume, with leadership provided by Chip, Financial and Industrial shares. The December S&P 500 futures closed Friday's session with a gain of +1.00 point out of the narrowest range in 2 months, and closed out the week with a gain of +19.50 points. Volume in the ES was estimated at 452,000 contracts, which was behind Thursday's pace and well below the daily average. On a longer-term basis, the 1,054-60 area continues to be a strong area of resistance defined by the Oct. high, weekly Fib resistance, and the 38% Fib retracement of the 3/00-10/02 decline (see chart). On a daily basis, the contract posted a doji just off the Oct. high, with a confluence of support still at its 10-day and 20-day MAs. The daily 3-Line break was able to reverse to the long side, with a new break price of 1,028.50. As far as the GDP data went, when looking at the headline number, the report appeared to be extremely positive. However, when going through the data and looking at how low activity was in the previous quarter, the strength may have been a bit overstated. And frankly, given how lackluster economic growth was for over 2 years and the enormous stimulus that was brought forward in Q3, it really should not come as too big of a surprise that a strong quarter could take place. Demand in Asia has soared recently, largely due to all the orders that were postponed earlier in the year because of SARS. Furthermore, activity in the U.S. also was hurt earlier in the year because of the war of Iraq. When you add these factors to all stimulus, you get a strong reading. It's interesting to note, Japan experienced a quarter even stronger than what recently took place in the U.S. in the mid-1990's, which was right in the middle of their deflationary trend. This is not to suggest that the U.S. is about to follow in Japan's footsteps, but to point out that 1 strong GDP number does not mean all will be well again. The bottom line is this: while the economy appears healthy in the short term, there still are lingering issues which could present serious challenges down the road. Looking ahead this week, we have an active economic reports calendar with the ISM Index on Tuesday, ISM Services and Factory Orders on Wednesday, and capped off with the October Unemployment report on Friday. After last week's disclosure of strong economic growth, market players will be seeking signs that the labor market is starting to recover. The Challenger job-cut report on Tuesday could give a hint, as it tallies corporate layoffs.