Thursday, 15 January 2015

What is the matter with DOW?! Where is the support?

Dear Friends,

Today the market looks bad. A 300 points drop during mid day in the DOW Jones. Today's drop, I would say, is due to 2 factors.

1) The bad retail sales report that was released today. The actual result of -0.9% is too surprising compared to the expected 0.2%. 



This result is horrendous considering it is the worst retail sales report since mid 2010. And this result comes on the heels of a supposedly "good" december holiday period seems all the more surprising!

And that explains the big drop today. This drop is a follow through of the poor ISM manufacturing report that came out on 2nd Jan. In Jan, DOW has already dropped around 700 points. 


2) The second reason DOW has dropped is because of the poor results recently issued by one of the well known financial bank JP Morgan. Bad earnings miss: $1.19 actual EPS vs $1.30 estimates.

Please check the article below to know its earnings miss:
http://seekingalpha.com/article/2820236-jp-morgan-chase-is-down-4-percent-disaster-or-opportunity

Wallstreet are taking the opportunity to sell as they expects the same results from other financial banks that will issue earnings in the next few days.

Today JP Morgan dropped 4%!

However I would suggest let us wait for the other banks results first. It might not be that bad. The reason why JP Morgan results is poor because they report a $990 million in legal expenses, or $1.1 billion on a pretax basis, which was higher than many analysts had forecast.

J.P. Morgan is being investigated by the Justice Department over alleged foreign-exchange rigging and is expected to strike a deal on the matter.  

However I would suggest the other banks might not be having such a poor results as they dont have legal issues. I remembered that last year Bank of America also faced a similar situation when they lost quite a lot in legal fees. Their share price also tanked. But in the end it came back.


To summarise, I would say don't worry too much yet until we see more data on the earnings season. One JP Morgan does not meant anything.

Furthermore, I think DOW still has a strong support at 17000! 300 points away from now! Don't fret just yet! It is a chance to buy stocks cheap, not sell!

Rgds
Daniel
www.danielloh.com




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