S&P500
Sydney Morning Herald
Monday August 17, 2009
IN THE United States the S&P 500 index recorded its first weekly drop in more than a month as concerns grew that the five-month-long rally had run ahead of the economic recovery.Last week the S&P 500 fell 0.6 per cent to 1004.1 in indecisive trade. Friday's worrying second straight drop in consumer confidence spurred end-of-week selling.The University of Michigan's consumer sentiment index has fallen to 63.2 this month from 66 in late July, highlighting, that despite the huge rallies on the markets, consumers are continuing to hurt as concerns grow over jobs and wages.With the US economy so dependent on the consumer, this most recent trend is becoming worrisome.Looking at the technicals, the S&P 500 clearly underperformed the ASX 200 this week and now looks likely to pull back further. The weekly inside bar posted a lower high and higher low, indicating a loss of upside momentum and that some indecision has begun to creep into the market.The consensus among professionals is that the market pulls back or consolidates from here for a number of reasons.Historically, September is the worst month, with US equities falling an average of 1.3 per cent over the month since 1928.This is confirmed by the Volatility Index futures. During the past week the futures indicated that investors were willing to pay a premium for downside protection. Other signs pointing towards a correction include a notable increase in insider selling, which suggests management teams are seeing current valuations as stretched.Ben Potter is a research analyst for IG Markets
© 2009 Sydney Morning Herald