WizzWatch Market Newsletter 10.27.08 – 10.31.08

This week was another rough week for investors as the market tumbled. The Dow Jones Industrial Average, The Nasdaq and The Standard and Poor’s 500 all ended the week on the downside. Some of the worst performers for the week were brokerage stocks, as well as shares of many energy stocks. Investors sold equities due to panic selling in the market as the volatility Index hit another all time high for the fourth straight week. The main factors that continue to bring the market down are solvency, mortgage weakness, credit concerns, hedge fund downsizing and liquidity worries.

Next week will be a big week for earnings as well as the (GDP) Gross Domestic Product data to be released on Thursday morning before the open of the market. The major market indices have been moving in a sideways consolidation for the past two weeks but the trend was broken as of the close of the market on Friday. We are currently in a bottoming phase and the major indices will not turn to the upside until we see a move above their 5, and 10 week moving averages trending with higher highs and higher lows on heavier than average volume. We will also need to watch for a cross to the upside of the (MACD) moving average convergence divergence.

The Dow Jones Industrial Average has been moving on the downside for the past 10 weeks and continues to head lower. Downside support for the Dow is currently set at 7,416 but we may never see that number unless the market turns around and head to the upside, but we must remember that we are still in a bear market. The Dow has not closed below 8,000 since March 31, 2003. The index ended the week trading at 8,378.95 down 473.27 or 5.35 percent on heavier than average volume higher than the average weekly at 5.8 billion trading volume.

Technology stocks were down the entire week and that didn’t help the tech weighed Nasdaq Composite Index. The index was the worst of all three major indices as technology stocks fell. The Semiconductor index was down for the entire week ending the week down 11.21 percent. The Nasdaq ended the week trading at 1,552.03 down 159.20 or 9.31 percent on 12.5 billion volume. As for the S&P 500 there was nothing that separated it from the Dow or the Nasdaq as it fell for the 10th straight week. The S&P ended the week trading at 876.77 down 63.78 or 6.78 percent on higher than average downside volume of 24.5 billion.

Crude oil fell 10% helped by weak demand for energy due to the slowdown in the economy. Oil took a dive after OPEC oil ministers stated that they will cut oil production in an emergency meeting held in Geneva on Friday. The cut was the first cut by members of OPEC in 2 years but instead of oil turning to the upside the price of oil fell. The 13 members agreed to cut 1 ½ million barrels per day in an effort to stop the fall of oil prices. The cuts in production will not start until November and there might be a second cut in December depending on the outlook of supply versus demand going forward. Many analysts felt that the cut was not enough to bring stability to the price of oil. I predict that oil will fall to $55 per barrel before turning to the upside.

In the gold markets we had a rough week pulling back to lows that were made in September 2007. The Gold Continuous Contract Index has been on a pullback for the past 4 weeks from $936.00 per ounce to a new 52 week low of $681.00, but ended the week slightly higher. The Gold Index is currently trading at $730.30 per ounce and it looks like its ready to make a move to the upside but a confirmation of that move has not yet been confirmed. The Amex Gold Bugs index, The Street Tracks Gold Trust Index, The Gold and Silver Index have all been pulling back and are all trading at or very close to 52 weeks lows. The Gold index ended the week trading at $730.30 down $57.40 or 7.29 percent for the week. If there is a decline in the price of the U.S. Dollar, that might be a signal for gold to head higher.

The Volatility Index also know as the fear index hit a new multi year high breaking highs that were set over the past 3 weeks. Last weeks high on the VIX was 81.17 but this week it broke the high of the week before to rise to a high of 89.53 but ended the week lower. The VIX ended the week trading at 79.13. The rise in the index confirms that there is a lot of fear in the market. Investors who are not in cash should be in cash rather than try to fight the current market conditions. We are still in a bear market and at this point the only money that should be in the market is smart money. The term smart money pertains to investment professionals that understand every aspect of the markets, fundamental as well as technical trading strategies. The VIX ended the week at 79.13 up 8.80 or 12.51 percent.

In the Forex markets the U.S. Dollar continues to head higher against a basket of major currencies. The greenback continued its surge due to weak economic conditions worldwide. This week there is a lot of economic data that will be released in the U.S. markets that might bring the dollar down after a huge run for the past 12 weeks. Based on technical analysis the greenback is oversold and might decline sooner rather than later. At the close of the Forex markets on Friday the EUR/USD ended the session trading at 1.2932 descending to a one and a half year low against the greenback. Please keep the U.S. Dollar on your radar for a possible pullback. If there is a pullback due to weak economic data in the U.S. markets this week, there will be a rise in the price of gold. One of the reasons for the decline of gold prices is because of the rise in prices of the U.S. Dollar.


By: Marlin Rolle

***** Please click on the major market charts below *****