Dow Lengthens Losing Streak

U.S. markets were all lower overnight as the Dow Jones and S&P 500 are now on a three session losing streak. Investors are increasingly worried we could get a taper heading into the New Year.

As economic numbers continue to roll in better than expected, well good enough to allow the Federal Reserve to consider tapering its asset purchase program which stands at $85 billion a month sooner than expected, investors grow more and more jittery. This cash injection has fueled the markets to rise higher and higher. The thought of reducing this cash injection could deflate the markets. The question is not that the Fed will taper it is when the Fed will taper? Investors are concerned we could see a taper in December.

STOCKS

The DJIA lost 94 points to close the day at 15914.62 on a day that saw 21 out of the 30 components of the exchange moving lower. This is the Dow Jones’ longest losing stretch since September. Looking at the S&P 500, the index was down 5.75 points to end at 1795.10. Materials and financials took the biggest hits on the day. Consumer staples and utilities did better than the other sectors. The Nasdaq Composite lost 8 points to finish the day at 4,037.20. We are still above 4,000.

Yesterday we saw 3 stocks falling for every 2 gainers on the NYSE. We had a volume of 770 million and the Composite volume was above 3.4 billion.

Asian and Pacific Rim markets are mixed today with the Japanese Nikkei leading the way down. The Nikkei is currently down 1.74 percent near a two week low just a day after its six week high and is moving lower. The yen also recovered a bit from a six month low against the USD. Would seem investors are taking profits after the huge rally last week.

The Shanghai Composite has jumped 1.7 percent after the People’s bank of China’s Zhan Xin said reform policies for financial liberalization in the Shanghai free trade zone will be implemented within the next three months. He said this will be used as a model for other free trade zones in the country as well.

In Australia, the ASX 200 reversed any losses as it moved off a seven week low even though the GDP number came in lower than expected. The AUD has also hit a three month low against the USD. Currently the ASK 200 is up nearly 20 points to 5275.25.

CURRENCIES

EUR/USD (1.3589) made a nice recovery to 1.3609. This rally was stronger than expected but the structure is inherently weak here. We are seeing a rising wedge so we are not surprised about the pullback. Should we go back above 1.3620 then we could see a strong rally to 1.3650 then a sharp drop. A break back below 1.3550 is bearish.

USD/JPY (102.488) has moved lower on profit taking. We saw risk of this while trading around 103.50. As long as the support at 101.99/98-97 holds we remain bullish. GBP/USD (1.6387) is trading sideways after bouncing off 1.6444. We see weakness below 1.63. Until then we remain bullish and could target 1.67.

COMMODITIES
Brent Crude (97.20) has recovered sharply today thanks to US manufacturing data as well as a reduction on inventories. We are testing resistance now and can move to 98.50 at this point.

WTI Brent (112.86) has also recovered nicely today. We now see resistance near 113.90/114 congestion area. We see strong supports at 109.90 and then at 108.50.

TODAY’S OUTLOOK
Investors will remain jittery in the States as the possibility the Fed could begin to taper its asset purchases this month if employment data comes in better than expected. Tomorrow we will see a whole slew of data from the ADP jobs report to ISM manufacturing.