daytrade diaries... february 3

Morning traders.

Market wrap: Australian stocks are set to open with healthy gains after a second night of advances for overseas equities and commodity prices.

Futures traders expect our market to start the session 54 points ahead of yesterday's close after U.S. investors were cheered by upbeat housing news and a falling greenback brought buyers back to resources. The local March SPI futures contract closed at 4626.

Wall Street rallied strongly for a second day on upbeat earnings results and a rise in house sales. The S&P 500 climbed 1.3%, the Dow 1.09% and the Nasdaq 0.87%.

December pending home sales bounced back from November's 16% plunge to advance 1% after a federal tax credit was reinstated. Adding to the improving outlook for housing, top-five builder D.R. Horton delivered its first quarterly profit since the housing-market slump began. Its shares jumped 11% in response. Bellwether stock UPS doubled its fourth-quarter profit.

Resource stocks were helped by a second day of declines in the U.S. dollar as investors rotated back into riskier assets. The U.S. dollar index, which measures the greenback against a basket of other currencies, slid 0.3%.

Crude oil futures surged 3.9% to trade recently at $77.32 a barrel after a fire at a Canadian refinery and on expectations that tonight's inventory data will show a decline in stockpiles.

Gold continued to benefit from renewed concerns about inflationary presures after promising recent global manufacturing data. The spot price was recently trading at $1,13.30 an ounce, up nearly $8 on Monday's New York close.

Industrial metals bounced back as investors questioned whether the recent "Chinese slowdown" sell-off was overdone. In London, copper rose 0.6%, aluminium 1.5%, lead 4.2%, nickel 1.3%, tin 2% and zinc 0.5%.

In the U.S., financial stocks closed mixed but there were solid gains for airlines +3.2%, biotechs +2.6%, consumer stocks 1.6% and oilers +1.2%.

European markets advanced for a third day as worries over potential sovereign defaults faded. Britain's FTSE gained 0.68%, Germany's DAX 0.98% and France's CAC 1.33%.

TRADING THEMES TODAY

ENJOY THE BOUNCE: Our market should continue to bounce back from oversold conditions and deliver plenty of trading opportunities today. It's a relief after two weeks of fighting a downtrend. However, it's too early to declare this recent correction over. Any bear market includes strong two-three day counter-trend rallies. The true test of this week's bounce will be whether the market holds these gains through to the end of the week, or stutters and falls once the shorts have covered their positions.

ECONOMIC NEWS: The Australian Industry Group's services index is released at 9.30 am. Of greater importance are trade balance data due at 11.30 am. Lots on in the U.S. tonight: year-on-year job cuts, non-farm employment numbers, services PMI and crude oil inventories.

Good luck to all.