Wednesday, 7 January 2015

Will we have good employment figures to stop the DOW drop?

Dear friends,

DOW these few days hasn't been good. It drop from 18103 to 17371 in just 6 trading days, a drop of around 600 points. 600 points doesn't seem much, does it?

This drop is contributed by 2 factors.

1) Crude oil continues to go lower and lower and this has affected the DOW. 

Speculators continue to push the price of crude down. Asian, European and American futures traders take their turns to push down the price one after the other.

The fall of crude now has nothing got to do with demand and supply. It has nothing got to do with OPEC decision. Neither has it got to do with the cost price of oil.

It has got to do with the abundance of money in the market. With different countries printing money, this easy money has trickled down into the hands of big speculators and institutions who don't really care about the economy. One word - GREED!

Having said that, I do think that DOW will slowly detached itself from the influence of crude price as we grow accustomed to the fall of crude.


2) The second factor that affected the drop is the economical report that came out last friday. ISM, institute for supply management has a figure that is below the forecast. Its actual figure is 55.5 versus 57.6 forecast figure. It is a total surprise considering that last month we are still in the midst of the holiday season.

With another important jobs reports that is going to come out this friday, the non-farm payroll report, traders take the chance to profit take. And I think this uncertainty about friday figures pushes the DOW down.

However having said that, our research shows that this jobs report figure on friday may have a good chance of beating the forecast. And there may be a rebound should it beat. In fact today we should already get a glimpse of how the jobs are. There will be a ADP employment report that is a precursor to friday non farm report. I wont be surprise that there may be a rebound if the figures are good!


My trading advice is to stay at the sideline for now until friday non-farm payroll report. 2 scenarios might occur:

a) Report is above expectations: May consider buying some oversold and good stocks.

b) Report is below expectations: DOW may still drop, my opinion is wait for DOW to touch 17000 and below before accumulating the stocks. Below 17000 is what we consider as cheap.


Rgds
Daniel

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