Hi AllI knocked off work early today so thought I’d post some...

Hi All

I knocked off work early today so thought I’d post some thoughts previewing tonight’s DJIA direction, and hopefully stimulate some commentary alongside everyone’s tips for the evening.

Anyway, it appears market direction since yesterday has been dominated by the 7% fall on the SCI in China, which generated nervousness globally although it appears resources and energy were the hardest hit sectors, while other sectors such as banks managed to survive reasonably well if not make further advances. After markets retreated yesterday they gradually started to recover partially overnight beginning with the US which opened 70pts down (DJIA), promptly headed further south before clawing back some territory to finish only 47pts down.

Our market followed on today to gradually pulled back most of yesterday’s lost ground to finish about 1% higher on yesterday’s close. I expect Europe to follow given the SCI is up < 1% so far today.

The SCI story should play out to completion tonight, barring bad economic news from Europe, with a positive open in the US tonight – so far Europe has opened mixed/positive with the DAX and CAC slightly up, while the FTSE is slightly weaker probably due to residual weakness in resources still lingering on from the China story.

What happens from there will of course depend on the US market. News due out tonight includes monthly auto sales, US pending home sales figures, and the ISM manufacturer’s survey. Auto sales figures and the ISM survey are possibly both going to show some improvement as both will continue to receive some temporary (but probably unsustainable) follow-on effect supported by the cash for clunkers car trade-in scheme.

All-in-all I think the direction will be positive (and hence I’ll be putting my official tip in today’s thread as per protocol so as not to cause any controversy), but not strongly so as the overhang in the market continues to provide some braking effect until the market makes its decision to go one way or the other.

FWIW, from what I observed of the reaction to the SCI drop yesterday, and a similar sized drop a few weeks ago, I think the story that makes or breaks the current rally will be China.

Anyway, let's see what happens. Cheers, Sharks.