daytrade diaries... november 20

Morning traders.

Market wrap: The Australian stock market will open in the red after a sharp pullback for global equities overnight.

A late rally pared the worst of the losses on Wall Street but the major indexes still recorded significant retreats after a night of weak economic data and bearish analyst outlooks. The Dow Jones closed lower for a second day but was the pick of the bunch with a loss of 0.9%. The broader S&P 500 gave up 1.34% and the tech-heavy Nasdaq was crunched by analyst downgrades for computer chip-makers, sliding 1.66%.

Traders set the setback was not unexpected after the recent strong rally and it was too soon to tell if the weakness would develop into a correction. "We'll have to watch a few more days to see if this reversal is really going to last and be something different than we've seen since March," said the president of a trading firm quoted on MarketWatch. "We're still in an institutionally driven market that can see pretty relentless buying when the institutions step up."

Weekly jobless claims came in flat and remain stubbornly high, hovering above 500,000 for the last 53 weeks. Economists had hoped for a small drop this week.

Gold miners were one of the few sectors to dodge the downtrend, rising 0.63%. Tech stocks slid 1.53%, REITs 2.46%, banks 1.97%, oilers 1.97%, natural gas companies 2.47% and industrials 1.5%.

Major European markets fell to one-week lows. Britain’s FTSE lost 1.39%, Germany’s DAX 1.48% and France’s CAC 1.77%.

Oil prices slumped for the first session this week, buffeted by a modest rise in the US dollar, tumbling equities and the weak demand implied by the jobs figures. Crude futures were recently trading at $77.72 a barrel, a loss of 2.37%. Gold futures came under early pressure from the US dollar but recovered as the greenback came off its intraday high. The spot gold price was recently trading at $1,143.90 an ounce, up 50 cents on yesterday.

Base metals pared some of this week's rapid gains. In London, aluminium gave back 0.97%, copper 0.78%, lead 2.7%, nickel 0.58%, tin 1.65% and zinc 1.38%.

Futures traders expect our market to open deep in the red. The SPI futures index closed 45 points lower at 4713.

TRADING THEMES TODAY

BOUNCE TRADES: Been a while since we had a big red day and the first in a pullback often offers good bounce opportunities because traders looking for cheap entries are willing to buy sell-offs. Look for stocks in uptrends pulling back to support levels in the first half hour of trade. Keep a tight stop-loss.

DEFENSIVE STOCKS: Defensive sectors such as health, telecoms, utilities and consumer staples should weather today's storm better than most as the big boys reduce their risk exposures.

ECONOMIC NEWS: Nothing significant scheduled here or in the US.

Good luck to all.