Odds The Bottom Is In
One of the surest ways to tell if an
intermediate-term bottom is in place is with a follow-through day. A follow
through occurs four to 10 days after a major bottom hits when a major index
moves up more than 1% on rising volume.
Today marks the beginning of the window in which to
look for a follow-through day. However, volume is light and the major
indexes are down, unable to capitalize on Friday’s surge prompted by Cisco’s
indication that the networking giant’s business slowdown may have
“stabilized.”
This week could be critical in determining if we will
have a follow-through day. But with many traders on vacation and trade
likely to be lighter due to the upcoming Labor Day holiday, the odds that we
will get the volume required to tally a convincing follow-through day are
reduced.
Global growth will also likely play a key role in any
turnaround in the US economy, corporate profitability and the stock market.
The world’s second-largest economy, Japan, said that its biggest
semiconductor manufacturer, Toshiba, will cut nearly 19,000 jobs and
streamline operations, in a sign of persistent weakness and flagging demand.
High numbers of layoffs tend to reduce consumer spending, responsible for up
to two-thirds of gross domestic product growth.
The market will also closely watch the European
Central Bank this week to see if the monetary policy setting organization
will cut interest rates to stimulate demand in the 12-country economic bloc.
At home, tractor maker Deere
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cut nearly 2,000 jobs and close plants in a sign of deteriorating
conditions in rural America.
Home Depot
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existing home sales fell more than expected and heightened concerns that
spending in one of the only resilient sectors of the economy — housing and
construction — could tail off.
In the sectors, oil services
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and utilities
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transports
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sectors.