TraderMongers.com: Apr 14, 2010

Wednesday, April 14, 2010

Day Trading Economic News Analysis: April 15, 2010

April Empire State Manufacturing Survey

In March the New York Fed reported that the Empire State Manufacturing Survey fell by 2 points to 22.86 from February's 24.91 however it is above the consensus of 22.0. New orders should see an increase in the April Empires State manufacturing index.

The manufacturing survey gives a detail look at New York's manufacturing sector, which is ahead of other surveys such as the Philadelphia Fed and ISM manufacturing index.

Jobless Claims

During the first week of April CareerBuilder.com provided a sense of optimism as the number of job listings increased. However last week the Labor Department showed negative signs in the labor market as jobless claims rose to 460k compared to 439k for the previous week. The increase may have been due to the Easter holiday as well as Cesar Chavez national holiday in California.

The 4 week moving average gives a better perspective than the weekly report.

Previously the 4 week moving average rose 2,250 to 450,250 from the beginning of March.

March Industrial Production

Industrial production shows how much manufacturing, mining, electric and gas utilities are utilizing their resources, which accounts for 20% of GDP. It is an important tool for forecasting future GDP as well as measuring inflation by central banks.

Last month February Industrial Production increased 0.1% following 0.9% in January. December industrial production also jumped 0.7% concluding a three month moving average of 0.57%. The three month moving average gives a clearer picture of the trend. However the future seems to be mixed as other indexes showed that both February Philly Fed and the New York manufacturing indexes rose however the ISM manufacturing index fell back.

April Philadelphia Fed Survey

Based on last month’s numbers April Philadelphia Fed Survey is expected to be higher. March Philly Fed reported an increase of 18.9 in manufacturing activity compared to February's 17.6. The Philly Fed is a good indicator for the industrial production index. Next month's industrial production should increase just as February Industrial Production increased to 0.1% following 0.9% in January. On Monday March 15th March Empire State Manufacturing Survey fell 22.86 from February's 24.91 however it is above the consensus of 22.0. These numbers are indicating that the manufacturing sector seems to be stabilizing as the economy is recovering.

Manufacturing is a major sector of the economy and gives insight into commodity prices. By understanding the type of investments the manufacturing sector is seeking, commodity prices will follow the direction as well as inflationary pressures.

If the manufacturing sector is seeking steel and other raw materials then the index will increase and so will the prices of these commodities as well as inflation.

Weekly Natural Gas Report

The Energy Information Administration reported last week the natural gas reported a rose to 31 billion cubic feet increasing from the previous 12 billion cubic feet for the March 26 week. Increasing inventories would most likely keep prices steady or lower because supply outweighs demand.

April Housing Market Index

March Housing Index decreased to 15 from February's 17 due to tighter credit, bad weather, and competition with other distressed properties. The housing index runs from 0 to 100 and shows the demand for new homes provided by the National Association of Home Builders.

Last month we mentioned housing sector stocks: Lowes and Home Depot. Both Lowes (LOW) and Home Deport (HD) were currently hitting their 52 week highs of 25.01 and 32.50, respectively. As of April 14, 2010 Lowes is currently trading at 26.59 (52 week high=26.63) and Home Depot is at 34.98 (52 week high=35.07). Homeowners are resuming fix-up and repairs of their current homes rather than purchasing or moving into new ones.

Tomorrow February Housing Starts will be announced in the morning providing data on new construction activity. The federal home buyer tax credit for first-time home buyers as well as repeat buyers ends on April 30, 2010. Qualified first-time home buyers receive a tax credit up to $8,000 while repeat buyers are eligible up to $6,500.

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Day Trading Economic News Analysis: April 14, 2010

S&P 500 Pivots

The S&P started falling to a low of 1189 before ending the day up 1 to the 1197 level. On Monday the S&P 500 reached a new 52 week high of 1199 as the afternoon kicked off earnings season with the announcement of Alcoa. Alcoa ended up nearly flat on Tuesday’s trading.

Wednesday’s primary pivot is 1195. Expect the market to trade between 1193 and 1197. Any trading outside this range could indicate trend changes pushing the index to new intraday highs or lows. The S&P 500 has been trending upward consistently on the daily charts.

Now that the Dow Jones has reached the 11,000 level the market is currently watching the S&P 500 1200 level. The last time it has reached this level was in 2008 so it is a major technical as well as psychological level for traders and investors. It was the level where the S&P held before the credit crisis occurred.

Summary of pivot levels:

1199: S&P 500 52 week high

1193 - 1197: Convergence of 8, 21, 55, 144 and 200 Fibonacci moving averages on 5 min

1194: Monday’s previous high

1189: Tuesday previous low

Commodities Analysis: Gold and Crude

Gold finished down $1 to $1153 as gold imports are up in India ahead of the one million weddings planned between April and May. Major of gold stocks within the sector were lower:

ABX (-0.81%) AEM (-1.19%) AU (-1.70%) AUY (-0.86%)

FCX (+0.52 %) GG (-0.79%) HMY (-2.61%) NEM (+0.43%)

A trading strategy for gold includes buying calls on SPDR Gold Trust (ETF: GLD). On the daily chart gold broke through the trading range above 1220 set in early December 2009. Gold is currently trading below Monday’s previous low of $1155.85. For the short term on the daily chart gold is expected to go lower as it has it been rising since March 24^th.

Crude oil fell $0.45 to $83.89. The dollar gained slightly against the euro. If the dollar continues to trend higher against the euro then expect prices in crude oil to fall. On the 60 day chart crude oil looks to be tipping over as traders are expected to take profits.

Previously the OPEC cartel announced that it will keep oil output ceiling unchanged as it will keep its profit from the falling dollar. Oil was currently trading sideways between the $80 and $81 however it has regained its footing reinforcing OPEC's decision of keeping oil output the same.

Forex Analysis: Dollar Vs Euro

The euro rallied over the weekend after euro zone finance ministers reached an agreement for the Greek aid package. However the euro came off its highs after the question of whether the package will have any effect or just plain grand standing.

GE is investing 340 million Euros ($460 million) to expand European wind operations. Companies buying into foreign currencies for purchases and investing increase the demand towards that country's currency. However the Euro gains are being cut short as Greece struggles with issues on their debt.

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