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Daily Blog -03/04/09- 1:46 P.M.

Global Oversold Bounce

China sparked an oversold bounce that spread across the world on Wednesday. News that Wen Jiabao, the Chinese Premier, was considering new plans to expand his country's $585 billion stimulus package fueled the advance. China is one of the world's largest consumers of raw materials and commodities. Steel, iron, metals and oil stocks were all up sharply today.

The Shanghai index surged more than 6% and the Hong Kong Hang Seng index rallied 2.5%. This rally, or more likely this short-covering, spread to Europe. The French CAC 40 rose 4.7%. The German DAX rallied 5.4%. The English FTSE added 3.8%.

The rally seemed to lose steam as it hit New York. The Dow Industrials are only up 1.8%. The NASDAQ Composite is up 2% and the S&P 500 is up 1.9%. On a positive note the rally in U.S. markets is widespread and investors are ignoring the weakness in financials. The BKX and BIX banking indices are down 4.8% and 8.5% respectively.

Chart of the S&P 500:

Chart of the NASDAQ:

Chart of the Dow Jones Industrials:

The Chinese story also influenced oil prices today. If China is going to do more on stimulating their economy then it should increase demand for oil. There was also a recent story out that China was considering ways to increase their own version of the strategic petroleum reserve and one idea considered was selling some of China's massive holdings in U.S. Treasuries to buy more oil. On top of this China news the weekly oil inventory report showed another unexpected decline in oil inventories here in the U.S. April crude oil futures rallied more than 7% and traded over $44.60 a barrel.

Economic reports were making headlines today. The ISM services report was released and showed a drop from 42.9% in January to 41.6% in February. Readings under 50% express a contracting economy. Meanwhile the private-sector ADP employment survey came out today and showed a loss of 697,000 jobs in the month of February. Small business, those with less than 50 employees, displayed the biggest declines. Such a big number from the ADP report only increases market apprehension for the upcoming non-farm payrolls (jobs) report due out this Friday. Expectations are growing that we might see 8.0% unemployment and a job loss of more than 700,000.

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