WizzWatch Market Newsletter 10.06.08 – 10.10.08

For the week that passed it was the worst week since September 11, 2001 for the stock market. The market continues to fall and there seems to be no end in sight as we are still looking for the light at the end of the tunnel. The Dow started out the week on Monday with a huge 777 point drop, the worst one day pullback in the history of the Dow Jones Industrial Average. There were a few stocks that made gains during the week but by the end of the week all gains were erased. The one day drop was due to the U.S. House of Representative not passing the controversial Henry Paulson $700 billion dollar bailout plan.

Before the close of the market Friday everything changed and the House of Representatives changed its decision and passed a new bill that was reconstructed with new terms and was passed earlier in the week by the Senate. After the bill was passed by the House it was immediately signed into law by George W. Bush but that didn’t change investor confidence in the market. The Dow fell 4% within minutes after the passing of the bill. Credit markets remain frozen as LIBOR rates hit a high of 4.33 from a low of 2.79 in the past 3 months. The volatility index which tracks investor confidence also rose to all time highs during the week at 48.40 but ended the week at 45.10 up 10.40 or 29.94 percent.

The market fell to end the week on concerns of a recession as well as many traders feeling that the bailout plan will not be enough to bring stability to the market place. Others feel that the bill took too long to be passed. There were a total of 12 new highs and 1061 new lows in the market on Friday. Commodities had its biggest downturn in 50 years. Material companies had their worst decline since 1989 as energy and industrials suffered huge losses for the week. Jobs were also slashed in order to cut cost as the employment report was worse than analyst expected. There were 159,000 jobs lost in September the most in 5 years with more to come. The Dow ended the day trading at 10,325.38 down -157.47 or -1.50 percent. The Nasdaq also ended trading on the downside at 1,947.39 down -29.33 or -1.48 percent. As for the S&P 500, it could not escape the storm; it also had a very bad week to end trading on Friday at 1,099.23 down -15.05 or -1.35 percent.

For now banks will continue to hold onto cash so that balance sheets can be protected from further stress. It is very hard for any bank to continue loaning money out in this economy not knowing if they will ever get those funds back into the system. This credit crisis that we are facing might last for the next 6 months to a year before we see any turn around. Banks will not be able to lend again until the markets are normalized. Steps must be taken in order to have free flowing capital put in place, and then we will see equity markets change direction and turn to the upside.

The Nasdaq had a very rough week along with the other major indices after declining for the past few weeks. The Nasdaq is currently trading below its 5, and 10 week moving averages with all indicators pointing lower on heavier than average volume. The Nasdaq opened the week at 2,1838.81 but ended the week trading on the downside at 1,947.39 -235.95 or -10.81 percent for the week on 6.59 billion volume. The Nasdaq is currently trading at levels that were made in April of 2005.

Over at the Dow there were a few similarities to the Nasdaq as it also continued its decline for the 8th consecutive week in a row. The Dow had its worst performance since 2001, but fell to lows that were made in July 2005. The Dow started out the week trading at 11,139.62 and pulled back to a low of 10,310.25 before closing to end the week slightly higher. This time last year the Dow was trading at multi year highs above 14,000 point. We have a lot of work to do to get back to those levels from here; the Dow is currently trading below all moving averages, its 5, 10, 50 and 200 week moving averages. The Dow ended the week trading on heavier than average downside volume for the past 3 weeks and ended the week closing at 10,325.38 down -817.75 or -7.34 percent.

As for the S&P 500 there were 19 stocks that were up for the entire week while the other remained on the downside. The S&P is currently trading at levels that were made back in April of 2004. The index started out the week trading at 1,164.17 but ended the week lower trading well below its weekly moving averages. The S&P ended trading on Friday at 1,099.23 down -114.04 or -9.04 percent on higher than average volume of 26.1 billion.

On the gold front it was a very challenging week as the index had its biggest decline since August. The index pulled back after 2 weeks of moving to the upside. The Gold index opened the week trading at $878 per troy ounce but pulled back to end the week lower trading slightly lower, The Gold Index ended the week trading at $833.20 per troy ounce down -55.30 or -6.22 percent slightly above its 5 and 10 week moving averages.

Oil continued to decline this week, the index had its biggest weekly drop since December of 2004. Oil drop a little over $13 for the week. There are concerns on demand due to the rise of the U.S. Dollar as well as the bad economic conditions that we are currently facing. Oil fell below $95 for the week after making an all time high in June of $147.90. There might be a spike in the price of oil in the near term if the dollar turns to the downside. If there is a global recession I predict that oil will pull back to $75 in the near term or maybe even lower. Oil started out the week at $106.89 but ended the week lower below its 5, and 10 week moving averages. Oil ended the week trading at $93.88 per barrel
down -13.01 or -12.17 percent.

By: Marlin Rolle
*** Please have a look at the charts of the major indices below. ***