The Pattern And Its Potential
Stocks are trading mixed following last week’s barrage of
resoundingly negative reports about the state of the US economy as traders
wonder how much effect an expected rate cut will have on stocks. The S&P 500
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had its worst showing of the summer on Friday after the jobs report showed the
biggest jump in unemployment in years.
The sharp increase in unemployment has increased
speculation the Fed will have to remain on the offensive to stimulate the
economy. Federal funds futures contracts in Chicago priced in a for-sure
.25% rate cut by the Fed’s October 2 meeting and as high as an 84% chance of
an additional .25% cut to 3.00% by Christmas. It is unlikely the Fed will
cut rates much below 3% as that approaches the real rate of inflation.
Historically, when the federal funds rate drops below the real inflation
rate, it sparks inflation, implying the Fed now has limited room to maneuver
to stimulate the economy
With corporate pre-announcement season upon us, the major
indices are likely to continue lower and fulfill patterns pointed out previously
in Market Flash. So with head-and-shoulders-tops patterns in the
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and
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a bounce should the indices continue lower?
Carolyn Boroden uses a mixture of time and price analysis
in her
S&Ps and Nasdaq Price Action Levels subscription service. Besides
supplying intraday levels to trade against throughout the trading session before
they occur in the Nasdaq 100 tracking stock
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and Nasdaq 100 futures
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provides bigger-picture analysis of the cash indices. Her recent work is
targeting the S&P 500
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then the 1036-39 area. For the Nasdaq 100 cash
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test to 1191 and potentially down to 874. Certainly institutions would look very
closely at the tech index should it drop to triple digits, a more than 80%
decline from its highs above 5000 made 17 months ago.
The S&P 500 is up 2.52 at 1088.37, the Nasdaq
Composite is down 4.10 at 1683.60, and the Dow is down 30.16 at 9575. The
Nasdaq 100 index of big-cap techs is down 1.71 at 1352.56.
Qwest Communications
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trim costs by firing 4,000 workers. Qwest is the most active stock on the
big board at the NYSE and is currently triggering out of an intraday
pullback from highs, up 1.29 at 19.43.
RF Micro Devices
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20% in two days following the announcement that it would break even, rather
than lose money in the second fiscal quarter. The stock is off from its
gap-up high, but has posted a gain of 1.45 to 23.76.
AOL Time Warner
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for AT&T’s cable TV business, a move that would merge the two largest
cable companies and would make a giant about three times the size of the
next largest cable company, Comcast
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potential alliance positively from AOL Time Warner’s standpoint, bidding up
the stock 1.20, or 3.7%, to 33.47.