daytrade diaries... august 4

Morning traders.

Market wrap: Stocks are poised for healthy gains today after fresh evidence of an upturn in global economic activity sparked a big night on commodity markets.

Share indexes in the US and Europe closed at new 2009 highs overnight after manufacturing reports from the US, UK, Europe and China suggested the worst of the global downturn is over. In the US, the S&P 500 index regained the 1000 point mark for the first time since November, closing 1.53% higher at 1003, and the Nasdaq cracked 2000, up 1.52% at 2009. The Dow added 1.25%.

The rally in the US lifted all sectors. Commodity stocks were helped by a 3.5% surge in the Reuters/Jefferies CRB Index, a benchmark that tracks the prices of major commodities, while the S&P Bank Index added 3.8% after profit results from British banks beat expectations.

An index of precious metals miners added 3.29% after gold hit a seven-week high. Gold futures touched $964 as the US dollar dipped to its lowest level this year, but have since pulled back to $956.80, up 0.3%.

American oilers advanced as crude futures topped $72 a barrel for the first time since early June. Crude futures were recently trading at $71.32, up more than 3%.

Base metals also benefitted from the rush into commodities after the upbeat manufacturing data. Copper hit its highest level in nine months, rising 4.9% in London. Aluminium was up more than 4% and there were new 2009 highs for nickel, lead and zinc.

Futures traders expect a bumper open to our market. With 30 minutes left to trade, the SPI was up 57 points at 4267.

TRADING THEMES TODAY

COMMODITIES: With the US dollar under pressure from a rotation into riskier currencies, commodity markets charged last night. Expect gains for oilers, goldies and especially base metals.

BREAKOUT TRADES: On days like this, it pays to scan the charts for shares on the verge of breaking old resistance levels. Positive sentiment on big green days creates powerful surges and makes these high-probability trades. I'll spend at least an hour this morning looking for candidates.

CYCLICALS: Last night's manufacturing data will likely spark institutional rotation from traditional defensive sectors - health care, telecoms, consumer stocks - into sectors with greater leverage to the expected global recovery - materials, mining, financials. Follow the money.

Good luck to all.