daytrades august 25 pre-market

Morning traders.

Market wrap: Australian shares are primed to open at a seven-week low after a collapse in the U.S. housing market sent overseas equity and commodity prices tumbling overnight.

The September SPI futures contract closed 57 points weaker at 4312 this morning, suggesting local shares will open at their lowest level since July 8.

Oil and industrial metals sank as grim housing data sent the Dow Jones Industrial Average back under 10,000 for the first time since early July. The Dow trimmed its losses to end the session 134 points or 1.32% lower at 10,040, its fourth straight loss. The S&P 500 fell 1.45% to a six-week low and is now 14% off its April high for this year, while the Nasdaq dropped 1.66%.

The rout was sparked by a 27% plunge in the annual rate of existing-home sales that surpassed economists' bleakest predictions. The monthly drop was the worst on record, exacerbated by the phasing out of a tax credit.

"This is yet one more piece of disappointing economic news," the chairman of Holland & Co in the U.S. told Bloomberg. "Irrespective of whether there's a double dip, jobs aren't being created. Without jobs they're not going to get better numbers on housing."

Materials and industrial stocks were hardest hit in the U.S. as investors re-assessed the outlook for raw materials for housing. BHP fell 2.55% in U.S. trade, Rio Tinto 5.72% and Alumina 3.81%.

The recent swing towards "safe-haven" assets continued, with the yield on 10-year U.S. government bonds falling below 2.5% for the first time this year. The U.S. dollar was initially hurt by the housing data but the Dollar Index has since swung positive, recently trading 0.2% higher. Meanwhile, Wall Street's "fear index", the VIX, rallied 7% to its highest level since early July.

Oil slumped to an 11-week low. Crude futures were recently down $1.63 or 2.2% at $71.47 a barrel.

Industrial metals retreated as traders fretted about weakening demand from the U.S. In New York, copper fell 1.5%, while in late trade in London, copper was off 1.5%, aluminium 0.6%, lead 1.9%, nickel 3%, tin 0.7% and zinc 2.5%.

Gold provided a rare highlight as safe-haven buying reversed several days of drifting. The spot price was recently $4.40 higher than Monday's New York close at $1,230.30 an ounce.

European markets came under pressure, with Ireland's benchmark index plunging 5.4% and Greece down 3.4%. Britain's FTSE fell 1.51%, Germany's DAX 1.26% and France's CAC 1.75%.

TRADING THEMES TODAY

DEFENSIVE TRADING: A grim session on most of the markets that matter overnight and suddenly a re-test of the early-July 2010 low seems highly possible. Volatility is rising, defensive assets are back in vogue and equities and key commodity prices are wilting. For me, defensive trading means keeping any overnight exposure to a minimum, reducing position sizing and mainly relying on quick bounce scalps in oversold shares, where in some cases I'm in and out in minutes. It's not as lucrative as momentum trading in the good times but it maintains an income until the outlook improves.

LOCAL EARNINGS: Another rotten day to release earnings results. These are some of the bigger names scheduled for today: AAX, AIO, CBD, EHL, HST, IIF, IRE, LGL, MAP, MOC, PBG, PIH, ROC, SDG, SUL, SUN, TSE, WOR, WTF. BHP is scheduled to release its results shortly after our market closes today. (Source: BRR)

ECONOMIC NEWS: Quarterly construction work data is due at 11.30 am. The U.S. gets a second take on its flagging housing market tonight, with monthly new home sales. Also tonight: monthly durable goods orders, monthly house price index and weekly crude oil inventories.

Good luck to all.