Volatility Again Grips U.S. Stock Indexes
New York-Oct. 7-FWN--If a creeping bear market was not enough to scare away traders Wednesday, then more volatility and seeming aimlessness on Wall Street did the job.
There was an almost inexplicable rally in the morning, with blue chips surging and the tech stocks rebounding. Then, both the high-profile and low-profile issues fell under a cloud while the blue chips held their value. Finally, the bear caught hold of the blue chips and sent them on a wild rollercoaster ride that saw them lose all of their morning gains and seesaw for the remainder of the afternoon.
"It's like a yo-yo without the string," remarked Peter Green, technical analyst at Gruntal & Co.
Wall Street has been acting in an almost desperate manner in recent weeks, over-reacting to both good news and bad. Most of the news of late, however, has been bad -- particularly as earnings reports trickle in for the third quarter.
As if traders needed to be reminded of the specter of global economic malaise that hangs over U.S. corporations, Fed Chairman Alan Greenspan called up the dark spirit Wednesday morning in a speech before a business group, vocalizing his view that earnings will have to be readjusted downward in the coming new year.
On that news, the market, for some reason, started a rally. It was only later, after stocks started tumbling, that it was supposed by some that Greenspan hit a nerve and scared some investors with his comments. When all was said and done, however, the Dow put an ironic twist on the day and finished just about where it started. It closed at 7,741.69, which was 1.29 points below where it closed on Tuesday.
The Dow had a high in the morning at 7,858.32 and a low in the afternoon at 7,629.44, representing a trading range of more than 200 points in which it bounced about quite madly.
"You're seeing a handful of Dow 30 stocks hold up the market," observed Green. "These are just marginal things. They're the stocks that you want to own in this environment, but the problem is the consumer hasn't felt this yet. Wall Street is discounting all of this but it's not meaningful until you see capitulation, and we're seeing everything red on your screen."
Capitulation instead has been coming by sector, as though the market was wading into the water as opposed to diving right in. The most recent sector to give it up and dive down is high-profile technology, which just so happens to provide important leadership to both the New York Stock Exchange and the Nasdaq.
Compaq Computer, Lucent Technologies and America Online all were among the most active on the NYSE Wednesday, and all were down.
Bond futures, meanwhile, suffered their first big setback in some time, dropping more than a full point Wednesday, with December bond futures closing at 133 1/32.
(c) Copyright 1998 FWN
Return to top of page
Metals Firmer After Huge Gains by Japanese Yen
New York-Oct. 7-FWN--The precious metals ended higher here Wednesday, with traders and analysts calling a sharp surge in the Japanese yen the main factor.
Silver lagged for much of the session, however, even though it eventually finished with a few cents gain. Sources suggested this metal was unable to keep pace with the sharp gains in gold after an attempt to the upside failed last week.
First during European trade and later during North American hours, analysts and traders on both sides of the Atlantic pointed to the yen's gargantuan gain from 0.7721 at the close Tuesday to 0.8387 at the close Wednesday as the key factor supporting the metals.
"Dollar/yen has broken major, major long-term support," said Tim Evans, senior commodity analyst with Pegasus Econometrics. "That is definitely influencing things here. That's the major fundamental support for the day."
As gold futures trading wound down, the dollar was down 9.67 yen for the day at Y120.65, which at the time was the low for the day. Currency market-watchers reported earlier Wednesday that the dollar ran into heavy technical selling as it initially fell on expectations that banking reform will be approved by the Japanese parliament.
But while the muscular yen lent some strength to gold, the December futures do remain in "no-man's land," said Evans.
"Technically, the market is within its range for the last week," explained the analyst. "So in that sense, we're not really breaking into any new ground here. The intermediate-term trend might still be up here, but we're not so sure of that. I would be more sure if we broke above last week's $305.60 high."
Evans put resistance at $304.50, a level touched late in the session, ahead of Friday's $305.60 high that was December gold's loftiest level since June 19. Support lies at Tuesday's $296.10 low, then $291.70 and $290.
The December silver futures lagged behind gold most of the session, trading little changed for much of the day before finally ending with a gain of 4.7 cents to $5.1370.
"It's really out of phase with what's going on in the gold market," said Evans. "It's still feeling the trauma of last week's reversal from the $5.4750 high. We've given back so much of the prior rally the market is a little traumatized from a technical perspective. Still, he noted, silver would seem to be technically "pretty neutral" since it remains near the middle of the range it has been in for the past six weeks or so.
(c) Copyright 1998 FWN
futuresmag.com |
