Market Overview / Year-end 2010
Wed. Dec. 29th 2010 7:00am
Market Overview
At the close of the equity market in the US yesterday the Dow and S&P 500 showed modest gains.
Even though that fact does not point to a true direction by the investors, yet the Dow and S&P reached a 2 year highs at the close yesterday, which is by itself a somewhat breaking point.
Energy stocks showed modest gains as well but the sector as a whole did not suggest any clear direction or momentum while gaining only 0.4%; however the long run outlook pointing to promising profits as the annual gain will reach as high as 17%.
The broader market didn’t really make any kind of an upward push until the final hours of trading. Even then buying interest was moderate and without conviction since only about 560 million shares traded hands. That was the case in the prior session, vacations and snow storms kept many traders away from their desks in the last week.
Support was losing grounds at market close therefore stocks ended the day with less than thrilling results. However stocks appeared unchanged despite the fact the dollar (USD) rallied back from a loss of 0.8% to a gain at the end of the trading day.
Currencies overview- 6:48 A.M.
The US Dollar recovered in the late hours of trading yesterday and after hours trading showing the continuation of that trend is ahead.
However Precious metals were unfazed by the US Dollar bounce. Silver settled at approximately $30.31 after a 3.6% gain while gold gained 1.7% at $1405.90 per ounce. On the other hand looking ahead the commodity market, Oil and Gold in particular, points to loses ahead of the New Year
The US Dollar index found support after nearly a 5 month slide hitting as low as 80.25 and bounced back up late last night.
The EUR/USD pair still showing gains as of early this morning stabilizing at about the 1.312 to 1.313 range as of 6:00am
The US Dollar still paired weaker against the other major currencies, especially the Japanese Yen (JPY) which gained nearly 0.19% over the USD. That fact can be contributed to a stronger than most others Japanese industrial recovery despite the fact unemployment remains high in Japan.
The currency market behavior in the last few weeks and the weakening of the US Dollar until yesterday bounce might show a change of direction in the market, and if it can gain a momentum we might see a recovery of the US Dollar.
Taking into consideration it is a short and “thinner” week in trading, unless investors are looking to liquid some assets or investments for tax purposes into the end of 2010, most markets will stay at a “non-impressive” movements until after the New Year, while most traders attention is directed elsewhere (family vacations, holiday shopping etc.)
However analysts believe that the US Dollar is due for a rally in 2011 starting in January and setting the trend for the rest of the year, so don’t let the low volatility of the forex market fool you or catch you off guard heading into the New Year.
The highest risk factor remains with the EUR/USD pair as the volatility reaches over 75%, followed by the USD/JPY at 45%, and all others are far behind (CHF, CAD, AUD, and GBP vs. USD).
Housing Market and Real Estate
It is a known fact that the economic crisis started (and probably will end) with the housing and Real Estate market in the US as a result of open ended loans and mortgages by the leading financial institutions.
It is also safe to assume that the housing market also will be the last to recover, however the US housing market showed signs of recovery by an increase of over 10% in pending sales of existing homes for the month of October 2010.
The forecast for the month of November is not expected to be as bright but still shows signs of some moderate increase and if the trend continues into 2011 we might be able to finally state the fact that the US housing market have bottomed out and behind us.
However financial institutions are still holding back with credit and loans and that might slow down further recovery in the US housing market, which might lead to a rally in the EUR/USD pair as investors are looking to for better gains elsewhere.
Economic Forecast
As we have seen signs of recovery in the US housing market and equity market, coupled with the fact the commodity and energy markets have shown resistance in recent months, it is safe to predict we might be on our way to a more stable and profitable market in the coming year as the economic crisis seeing some light at the end of the tunnel.
By Gideon Barazani