daytrade diaries... october 26

Morning traders.

Market wrap: The Australian stock market will open the trading week in the red after pullbacks on Wall Street and in key resources.

Futures traders expect our market to give back most of Friday's gains after U.S. markets finished last week lower for the first week in three. The SPI futures index closed 28 points down at 4824. In the U.S., the Dow Jones Industrial Average slipped back under 10,000 points, closing 1.08% lower at 9972. The S&P 500 retreated 1.22% and the Nasdaq fared best at -0.5%.

Sentiment on Wall Street continues to yo-yo with emerging third-quarter earnings reports. On Friday, strong earnings from Microsoft and Amazon were largely ignored as investors fretted about a weak outlook from railroad operator Burlington Northern pointing to soft economic activity. Also harming sentiment were falling commodity prices as the US dollar rallied on news that the UK's recession has stretched into a record sixth quarter.

"Any time the dollar shows signs of life, the stock market goes down. There's a flight to safety," said a US trading manager quoted on Reuters. "The (weak) UK GDP gave strength to the dollar. And when the dollar is up, oil falls."

Most American sectors finished in the red - banks down 2.02%, insurers -1.75%, oilers -1.66%, gold/silver miners -1.17%, REITs -1.27%. European markets were mixed. Britain's FTSE rose 0.68% but Germany's DAX dropped 0.76% and France's CAC 0.33%.

Crude oil futures slid below $80, down 0.86% to $79.64. Gold remained safely within the narrow trading range of the last three weeks but pulled back towards the lower support level. The spot price finished the week at $1054.80, down $5.

Base metals closed mixed in London and little changed for the session. Copper inched to a 13-month high, up 0.53%, and zinc touched its highest level since mid-2008. Zinc rose 0.67%, tin added 0.5% and aluminium 0.2% but lead lost 1.04% and nickel 0.73%.

TRADING THEMES THIS WEEK

US REPORTING SEASON: 149 companies in the S&P 500 are due to deliver third-quarter earnings this week. Of the 199 companies in the index that reported earnings up until last Thursday, 81% beat analysts' forecasts. However, concerns are growing that too many companies are relying on cost cutting, rather than business growth, for their results.

DIRECTION? Despite a modest 0.35% rise, our market basically consolidated recent gains last week. It continues to look over-stretched in the medium-term - but then it has for a few months now. Trading in the US was skittish and uncertain, whipsawing hard in both directions. It's not a time for big bets to the long side. Stay nimble.

ECONOMIC NEWS: The most important number of the week in the U.S. is Thursday night's GDP figure. Economists expect an annual rate of +3.5%. Today's local interest is the producer price index, an early indicator of inflation, at 11.30 am. There's a relatively quiet start to the week tonight in the US with regional manufacturing figures and a monthly index of economic activity.

Good luck to all.