daytrade diaries... october 22

Morning traders.

Market wrap: Local investors will weigh surging resources against a late slide on Wall Street overnight.

There were substantial gains for oil and base metals overnight, plus a modest rise for gold, but the final-hour action in the U.S. will weigh on our market. American equities were higher for much of the session but fell off a cliff in the final hour of trade and closed lower for a second day. Speculation about the causes of the sudden tumble centred around negative sentiment after a Wal-Mart analysts' meeting and the fact a well-known financial analyst slapping a 'Sell' rating on banking giant Wells Fargo, according to MarketWatch. The Dow closed 0.92% down, the S&P lost 0.89% and the Nasdaq 0.59%.

MarketWatch initially attributed the sell-off to "noted banking analyst Dick Bove", who cut his investment rating on Wells Fargo to sell from hold. "When Bove downgraded Wells to sell, that just took the entire market down," said one trading chief.

The S&P Bank Index in the U.S. lost 2.8%. Airlines were walloped, losing 6.25% as oil hit a new yearly high. Transport stocks also suffered, dropping 2.95%. Oilers, gold/silver miners and utilities provided the day's few meagre gains.

The major European markets were down in early trade but staged V-shaped recoveries into the close. Britain's FTSE added 0.28%, Germany's DAX 0.37% and France's CAC 0.05%.

Crude oil futures nudged $82 a barrel after a smaller-than-expected rise in US stockpiles and further falls in the US dollar. However, the slump in US equities has recently pulled the price back to $80.79. Gold futures rebounded above $1064 but have also pulled back recently to $1057.70.

Base metals were snapped up in London as the US dollar dropped 0.8% against a six-currency index. There were new 2009 highs for copper and zinc, up 2.7% and 4.8% respectively. Nickel rose 4.7% and lead 6.3%. Aluminum and tin also advanced.

The late slump in the US knocked the bottom out of our futures market. The SPI futures index closed 33 points lower at 4812.

TRADING THEMES TODAY

EDGINESS: It didn't take much to change the entire mood in the US last night. One 'Sell' rating on a major bank and the whole market deflated like a punctured balloon. Not a good sign. When the market starts jumping at shadows it's time to be cautious because a correction is likely near.

BASE METALS: Last night was a huge session for metals bulls. Any base metal that didn't set a new 2009 high last night pushed back to within striking distance of a breakout. With the US dollar in freefall, the outlook is bright.

ECONOMIC NEWS: Nothing significant locally today. Tonight in the US: more Q3 earnings reports, the house price index for August, retail sales, jobless claims and leading indicators.

Good luck to all.