Weekly Market Analysis (December 27-31) |
Indices
Stocks ended a notch below record two year highs with solid double-digit gains for the year after a quiet New Year’s Eve session that ended with the major indexes narrowly mixed.
The Dow Jones Industrial Average rose 1,149.46 points in 2010, or 11.02 percent, closing just 7.87 points shy of its closing high of 11,585.38 for the year, hit on Dec. 29. The Blue-chip index is up 31.92 percent since 2008. On Friday, the DOW gained 7.80 points or 0.07 percent. The NASDAQ rose 383.72 points, or 16.9 percent this year. The tech-heavy index is up 68.2 percent since 2008. On Friday, the NASDAQ fell 10.11 points, or 0.4 percent. The NASDAQ rose 383.72 points, or 16.9 percent this year. The tech-heavy index is up 68.2 percent since 2008. On Friday, the NASDAQ fell 10.11 points, or 0.4 percent.
Dow Jones Industrial Average (December 27-31)
FOREX
The US Dollar finished 2010 on a weak note, falling against all G10 currency counterparts in the final week of trading. Yet the Dollar is poised for a potential reversal into the New Year if we see resumption in its aggressive reverse from previous lows. A return to full market participation and a busy economic calendar could make for particularly sharp moves in the days ahead. The first week of the month tends to set the pace for subsequent weeks, and January quite often sets the pace for the rest of the year. Thus it could be a particularly pivotal week of price action for the US Dollar and trends for 2011 and it will be important to watch for breakouts in key pairs.
Top-tier economic event risk promises sharp financial market moves in the days ahead, but how the US Dollar might react is anyone’s guess. The headline data release will be Friday’s US Nonfarm Payrolls report, and earlier-week FOMC Minutes, ISM Manufacturing and Services numbers, and ADP Employment Change results could likewise spark sharp moves in US Dollar pairs. It has never been clear how the US Dollar will react to positive and negative surprises in labor market data and other key growth figures. On the one hand, positive economic data should boost the appeal of US Dollar-denominated investments and drive US Dollar gains. On the other, the Dollar remains negatively correlated (inverse) to financial market risk sentiment, and any rallies in the US S&P 500 could lead risk-driven declines in the dollar.
EUR-USD (December 27-31)
Commodities
The price of oil rose to $91.38 a barrel on Friday, ending the year up more than 12 percent with an average price of nearly $80 a barrel, thanks to cold weather, rising global demand, falling inventories, and the weak dollar. Meanwhile, gold rose 29.76 percent in 2010, closing Friday at $1,421.10 an ounce, a new high.
(Crude Oil December 27- 31)
Equities
The Dow came close to ending 2010 at a fresh closing high for the year; if the DJIA closed above 11585.38, it would have reached its highest close since August 2008.
Alcoa, Inc. (AA 15.39, +0.18, +1.18%) led the Dow’s ascent on Friday, rising 1.2%. However, Alcoa turned in the fifth-worst performance of the year among the measure’s 30 components, with a 4.5% drop. Hewlett-Packard Co. (HPQ 42.10, -0.16, -0.38%) was the Dow’s worst performer of 2010 with an 18% drop over the period. It was also weak Friday, slipping 0.4%. The Dow’s best performer of the year was Caterpillar, Inc.(CAT 93.66, -0.21, -0.22%) with a 64% jump. Caterpillar shed 0.2% on Friday.
About the author: BinaryOptionStrategy- David Frank
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