Forecast: Dow Jones Industrial Average will try to play back losses sharply and uncompromisingly

Forecast: DJIA gets all the prerequisites for growth after long weekend

In brief: Forecast - Dow Jones Industrial Average rested for three days. European and Asian stock markets give a chance Nasdaq Composite, Standard & Poor's 500 and the DJIA for rapid growth.

Dow Jones Industrial Average can not write the last week of trading in the asset. The last week has become a feast for bears. Last week the U.S. stock market was marked by the most significant five-day drop in share price since October of 2008. So blue-chip barometer Dow Jones Industrial Average (DJIA) for the period from Monday to Friday, pinched by 4,5% (7,1% YTD), the index of wide market S & P500 dived by 5% (8.3% YTD) and tech Nasdaq Composite fell by 5,9% (7,8% YTD).

In parallel, culminating five days recorded a second consecutive month of retreat of stock indices from the April highs. During this time the DJIA has lost 13.5% weight, S & P500 slipped by 16% and the Nasdaq Composite shriveled by 17%. In fact, the Dow and the Nasdaq returned to the values of eight months ago, and S & P500 for a nine-month minimum. The reasons for the correction, as expected after the historic 13-month rise S & P500 by 80%, did not have far to seek. At the appropriate time the problem cropped up with the European sovereign debt, the Wall Street suddenly had a paradoxical computer malfunction and began to slip the Chinese locomotive, but American business has steadfastly refused is generated in large numbers of new jobs. When a correction is overdue, bear landing on the fore stock exchanges is seen as inevitable. However, the situation in the world economy is not as bad as two years ago. The massive infusion of liquidity and a variety of incentive programs revived economic growth in the vast majority of countries. Interest rates in key economic areas are still at historical lows and are likely to persist as such, at least until the end of this year. On the nose season of quarterly reports, and analysts predict a rise in net profit in the second quarter by companies from the list of S & P500 by 27% compared to the same period last year. In absolute terms, it is expected that 500 largest companies in the New World, earned a net over the past quarter of not less than $ 183 billion and a total of up to 2010-year captains of big business are expected to increase its holdings by 34%.

In connection with the above, the ratio P / E (price / yield) in the shares of the first tier looks quite tempting since the last correction. “When the S & P500 and Nasdaq Composite fell back by 16% and 17%, respectively, is an attractive level to buy the components of S & P500″, – accepts Stephen Goldman (Stephen Goldman), a market strategist at investment firm Weeden & Co. However, Goldman while cautiously adds, – “if you do, of course, do not expect a second wave.” The investment community is now divided into two camps, believes Tommy Williams (Tommy Williams), head of consulting firm Williams Financial Advisors. “Some people who believe that the coming second wave of the crisis that emerged in the cache, others who are more fundamental look at corporate rates, in contrast, are going to use the correctional movement as an opportunity to successfully enter the market”, – states Williams. From a technical point of view for the index S & P500 at this stage it is important to keep the level of 1010 points. If he survives, then rebound in the area of 1080 units, and may be higher by more than real. If the bears are selling the market closely to the psychological fence at 1000 points, then, as a consequence of a mass surrender and the failure to the level of 940 units (50% from the top of the Fibonacci) seems likely outcome. In my opinion, the first scenario is now more plausible if only because of noticeable oversold market. Besides the fall in gold prices by almost 5% over the last three days indicates the exit of capital from the protective harbors.

Ukrainian Globalist
2010-07-05 16:05, Economics.

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