daytrade diaries... august 11

Morning traders.

Market wrap: A limp start to the week on overseas equity and commodity markets points to a soft session on the local market today.

Futures traders expect our market to open in the red after modest losses in Europe and the US. With 30 minutes left to trade, the SPI futures index was up 2 points at 4267.

Overseas investors locked in profits, with London down 0.2%, Paris 0.47%, Frankfurt 0.75%, the Dow Jones 0.34%, the S&P 500 0.33% and the Nasdaq 0.4%.

In the US, there was some rotation from cyclicals into defensive plays, with falls in financials, airlines, gold and REITs. An American strategist quoted on MarketWatch said Monday's trading looked "like a little bit of a safety rally in the sense that health care and energy are up. You can see the ones up are seemingly the less-cyclical."

Gold futures slipped for a fourth session, weighed down by evidence of sluggish investment demand. The spot gold price was recently down nearly 1.5% at $945.70. Strength in the US dollar saw crude oil futures off 0.46% at $70.98.

Base metals were up in early trade but all except nickel slipped into the red on concerns that markets are looking "frothy". Copper lost 0.2% in London. Goldman Sachs said base metals investors should reduce their holdings. “Base-metals prices have run further and faster than we believe to be justifiable, either on current fundamentals or on the short-term outlook,” they said.

TRADING THEMES TODAY

TURNING POINT? Global markets have yet to generate an obvious Sell signal, but last night's action once again looks "toppy". After four straight weeks of near-vertical gains, a little sideways action or a pullback would be healthy. Any pullback is likely to be shallow IMO unless the economic signals deteriorate dramatically.

DEFENSIVES: If - and it's a big if - this is the start of a period of weakness, the sectors that will come through best will be traditional defensives such as utilities, health care, telecoms and consumer stocks. It's worth having a few on your watchlist.

REPORTING SEASON: It's a big day for mid-caps, with a slew of companies reporting today, including JBH, PRY, APN, COH, MGX, PEM, SEV, UGL and VGH. (Dan68 posted an excellent list in yesterday morning's thread - post 28640 - thanks, buddy.) Profit results generate volatility and where there's volatility, there's opportunity.

Good luck to all.