The Dow reached a low of 10084 today, over coninuing pessimism with worse than expected initial jobless claims (470K vs 450K) and orders for durable goods (0.3% vs 2%), and continued uncertainty over Bernanke's relection (which was later confirmed).
Following on from the previous quarters better than expected GDP results, the market is forecast for tomorrow is 4.5%. Given the level of stimulus in place, I think we still have a 50 50 chance of this being met. However, as stated in my previous blog, will the market rally off it?
Secarios, and strategies:
A)GDP worse than expected, 2-3% lets say.
Strategy:
1)Sell the Dow, Stop at 10190, target 9600
I see no reason why the Dow cannot break through the 10,000 mark, to target 9800 initially over the next two weeks, and finally after a worse than expected Non farm payrolls resut in the weeks ahead, to target 9600.
2) Sell Eurusd (and also buy US dollar index)
Eurusd currently around 1.39, heading towards 1.30 by the next quarter.
3) Sell the miners (Rio tinto target around 2600)
4)Sell Crude (Currently at $73 Targeting $65)
B) GDP meets or exceeds expectations
1)Buy the Dow targeting an initial rally to the 10200 region. However I expect it to sell off quickly after this rise, as the market awakens to the continuing poor fundamentals.
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Scenario B took place, GDP exceeded expectations coming in at 5.7%!!
ReplyDeleteNote the market rallied up to 10240, and then sold off again (as I had thought would be likely) to lower than it was prior to the GDP news release, closing at 10061.
Note, the market selling off on "good news", as I mentioned above, leading me to believe that the "V-shaped recovery" is coming into question.
With the lack of top line growth, so far, in Q4 earnings, what could be a catalyst to drive the dow higher?
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