daytrade diaries... november 12

Morning traders.

Market wrap: A fifth straight day of gains is in prospect for the local stock market after modest overnight gains for commodities and overseas equities.

The Dow Jones Industrial Average recorded its sixth consecutive winning session in low-volume trade during the Veterans Day bank holiday. U.S. stocks surged from the open on yesterday's upbeat Chinese economic data and after the Federal Reserve reassured investors that low interest rates are here to stay. The major indexes gave back some early gains as the US dollar rallied off a 15-month low but all closed higher. The Dow added 0.43%, the S&P 500 gained 0.5% and the Nasdaq 0.74%.

Investors were cheered by news that Chinese factory output hit a 19-month high in October. China's industrial production rose 16.1% in the year to September, beating expectations of a rise of 15.5%. Also helping sentiment were comments by top Fed officials that the US recovery will be rocky and low interest rates and continued economic stimulus will be necessary.

Financial stocks benefitted from the Fed outlook, rising 1.8%. Other standout sectors were airlines +2.74%, transport stocks +2.8%, REITs +2% and telecoms +1.07%. Resources stocks were mixed.

The major European markets also pushed higher. Britain’s FTSE added 0.69%, Germany’s DAX 0.98% and France’s CAC 0.76%.

Gold ran to another record high near $1,120 an ounce, helped by the promise of long-term low US interest rates. The spot price recently traded at $1,117.70. Crude oil benefitted from confirmation of rising Chinese oil imports last month, trading recently 0.25% higher at $79.25 a barrel.

The base metals market found little cheer in the Chinese data, recording meagre gains as traders fretted about weak consumption elsewhere. In London, copper rose 0.08%, lead 0.31%, nickel 0.12% and zinc 0.88%, while aluminium closed flat and tin lost 1.01%.

Futures traders expect our market to open in the green for a fifth day. The SPI futures index closed 20 points higher at 4788.

TRADING THEMES TODAY

NEARING A SHORT-TERM TOP? This week-long rally is starting to look a little long in the tooth. The Dow has jammed on more than 500 points in six days and that's unusual, even in these exceptional times. Markets never run straight for long. It would not be surprising to see profit-taking creep in as the end of the week nears. However, any pullback is likely to be mild and of minimal significance to long-term holders. The medium-term outlook with so much cheap money washing around appears bright.

CHINA: Yesterday's Chinese economic figures were predictably strong but the muted reaction, particularly on the London Metals Exchange, suggests much of the good news was built into current prices. A bearish sign? No cause for panic but it's worth maintaining a watchful eye.

ECONOMIC NEWS: Another busy day locally with this month's consumer inflation expectations figures due at 11 am and more importantly, October unemployment data at 11.30 am. Tonight in the US brings the Federal budget statement, unemployment claims, crude oil inventories and a speech from Treasury Secretary Tim Geithner.

Good luck to all.