In the latest disappointing news on the US economy, factory output in the US central Atlantic region contracted again in August and new home sales fell to a five-month low in July.
Manufacturing, which had been among the strongest sectors in the US recovery, has become an area of concern. In addition, the Philadelphia Fed said an index covering factory activity in its region dropped to a near 2-1/2 year low in August. Equity investors are taking a “bad news is good news” approach, though, speculating the Fed could step in with help again.
Markets have been in turmoil for the past month, weighing another possible US recession and the impact of the euro zone debt crisis on the global economy. Benchmark stock indexes are on track for their worst month since the end of 2008, after the collapse of Lehman Brothers investment bank.
Looking in more detail, the stock market respected price support levels in price action last week but also seem to have offered a significant piece of information. According to CityIndex “Right now the secondary decrease which seems to have played out suggests that higher prices ought to be expected in the short term but we should also experience choppy moves with up-down days instead of a parabolic move to the up side. Once stock market indices reach price resistance levels there might be another distinct downwards swing below the recent low”.
Now that the Dow Jones Futures market has shown its respect for the 10800 price support mark, the stock market index appears ready to tackle its up side secondary target level. So far the stock market index has cleared 11365 following a second attempt. This would indicate that as long as the 10800 level is not breached then 11950 would become the key mark to overcome.
Even so along the way a price barrier at 11675 – 11725 has to be cleared otherwise the Dow 30 could certainly stall & come tumbling back lower again. Like other worldwide stock market indices the course of the market still remains downbeat having said that shorter term rallies are likely along the way. Of course, these will probably be short lived.
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