daytrade diaries... february 8

Morning traders.

Market wrap: Australian stocks are tipped to open marginally lower this morning despite a dramatic late turnaround on Wall Street on Friday.

The local March SPI futures contract closed down 11 points at 4464 after another weak session for commodity prices as the U.S. dollar hit an eight-month high.

The Dow Jones Industrial Average was off nearly 170 points in morning trade on Friday but reversed after lunch to close 10 points or 0.1% higher. The S&P 500 was stronger at +0.29% and the Nasdaq was better still, up 0.74%.

Market observers attributed the late turnaround to a mix of short-covering ahead of the weekend, technical buying at a key moving average and selling exhaustion.

"It's less driven by an influx of bargain hunters and more the exhaustion of sellers," a market strategist told MarketWatch.

The U.S. dollar benefitted from a surprise dip in unemployment from 10% in December to 9.7% last month. This marked the lowest unemployment rate since August. However, nonfarm payroll employment declined again when economists had forecast a small increase.

Also weighing on the market were ongoing concerns about European debt. "We're not convinced that the declines in Europe have reached an end," a U.S. currency strategist told MarketWatch. "Dollar longs are attractive at this stage."

Crude oil futures dipped below $70 a barrel on Friday for the first time since mid-December but bounced with U.S. equities to close at $71.19 for a loss of 1.73% for the session.

Gold also came under early pressure but rallied as the greenback weakened in afternoon trade. The spot price closed $1.80 higher at $1,065 an ounce, enough to fuel a 5.35% gain in an index of U.S. gold/silver miners. Other U.S. sectors to show significant gains were airlines +2%, REITs +1.95% and financials +1.9%.

The rally in the U.S. came too late to prevent further losses on the London Metals Exchange. Copper fell to a fresh three-month low, closing 1.6% weaker. Aluminium slipped 3.1%, nickel 2.1%, tin nearly 7% and zinc 3.6%. Lead finished flat.

European markets capped their worst week in 11 months with heavy losses as debt worries continued to cast a long shadow. Britain's FTSE dropped 1.53%, Germany's DAX 1.79% and France's CAC 3.4%.

TRADING THEMES THIS WEEK

BOUNCE? Friday's remarkable reversal in the U.S. offers some hope for a short-term bounce early this week but there are plenty of potential obstacles: the PIGS debt crisis in Europe, the removal of the local banks guarantee (see below), sliding commodity prices and local earnings results (see below). With the VIX on the rise, the recent rollercoaster ride should bring plenty of ups and downs this week.

BANK GUARANTEE TO END: The Treasurer announced over the weekend that the government guarantee for wholesale funding and deposits over $1 million will expire on March 31. In other words, our banks will no longer be able to rely on the government's AAA credit rating for their borrowing. Essentially it's a vote of confidence in the strength of the banks, but how will it affect the bottom line and more importantly, share prices?

EARNINGS SEASON: The local earnings season has been slowly cranking into life. Results from some of the bellwethers this week will provide a benchmark. Among this week's key reports: today - JBH; Tuesday - COH, AWC; Wednesday - BHP, CBA, SGP; Thursday - RIO, TLS, AQP; Friday - NCM, MIG, LEI.

ECONOMIC NEWS: It's an unusually quiet start to the week, with nothing significant scheduled here or in the U.S. today. However, the rest of the week brings key Chinese data; local business confidence and unemployment numbers; and the usual slew of U.S. data.

Good luck to all.