You Should Follow
Did you catch the
follow through day? A follow through day occurs after a major bottom when
one of the major indices rallies at least 2% on rising volume and is your
first indication that a low could indeed hold. Friday, both the S&P 500
and the Nasdaq followed through, and the Dow, which rallied 1.9%, missed by
just .1% the minimum percentage rally required to score a follow through
day.
While the market
still needs to find leadership groups moving to new highs to propel it
further, a follow through day is a solid argument for the bulls.
The market is coming
back, and arguably holding up well after another dismal round of news on
corporate performance. But economic figures may also be showing that the
worst is behind us, in terms of economic contraction.
The Dow is down 4 at
8841, the Nasdaq Composite is down 12.17 at 1486.12, and the S&P 500 is
down 1.33 at 1039.78.
Sungard
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MGM Mirage
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and that business would be hurt by the Sept. 11 attacks. SDS is down .91
at 21.15 and MGG is off .33 at 22.15.
But patterns on both
the Nasdaq 100
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indices moving out of intraday cup and handles, setups that are likely to
jettison the indices back onto positive ground.
The Fed meets
tomorrow and it is widely expected to cut interest rates. Fed funds futures,
the best predictor of likely Fed action, is pricing in a nearly
“for-sure” 50-basis-point rate cut to 2.50% tomorrow. This will
inject even more liquidity into the market and would total 100-basis points
of rate cuts in two weeks, a potentially tremendously positive jolt for the
economy.
Although still negative, reports are beginning to
provide evidence the economy may have found a bottom. Friday’s regional NAPM-Chicago
and today’s national NAPM both came in stronger than expected. The NAPM
manufacturing index fell to 47 in September from 47.9 in August. The market
was expecting a decline to 45.6.
And although Friday’s Michigan sentiment index was
down, the impact to this key psychological measure was not as bad as many
had feared.
Airlines
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sectors, up 1.60%. Biotechs
(
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+1.24%, are other leading areas.
A downgrade in selected stocks in the semiconductor
sector
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-2.86% and forest and paper products
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areas of the market.
Know Your Limits
Every quarter, the Chicago Mercantile Exchange makes revisions to the limits
on its stock index futures products. Limits are recalibrated to reflect a
point value that represents a 5% move in the value of a stock index based on
the current point-value of the index. Hence, a 5% limit move in the S&P
futures for this quarter comes once the S&Ps move 50.00. A limit move
occurs once the Nasdaq 100 futures move 60.00. In a limit move, trading is
halted between 10 and 12 minutes. The next limit move is invoked if an index
moves 10%. Limit moves generally halt a market’s decline — at least
temporarily.
New Mini
Today marks the first day of trading for The Chicago Board Of Trade’s “mini-sized DJIA futures based on the Dow Jones Industrial
Average. Like their CME-traded counter-parts, the Dow minis are 1/5 the size
of the CBOT’s pit-traded Dow futures contract. The tick value is $2, which
is also the minimum tick (or incremental movement) size. Similar to other
mini products, the Dow mini will trade in four contract months December,
March , June, and September and is cash settled the third Friday of the
contract month. “JY” is the symbol for the Dow mini.