October 2010 Stock Market Overview: Fundamentals Not Improving, Technicals Not Worsening

Due to a growing expectation that the US Federal Reserve will ease a credit environment to help the economy recovery, the US dollar dropped to several-month lows against most foreign currencies. More dollars may stimulate the economical growth. On the other hand, if the Federal Reserve pumps more dollars into the economy, a falling dollar can negatively affect consumers, businesses, and investors.

A dollar weakness together with the news that the US federal deficit for the 2010 budget year was estimated around $1.3 trillion add some fear of the instability of the system, Gold hit a new high that may also evidence a weak hope among investors for a decent stock market performance.

The US unemployment stayed at high 9.6% rate for the last couple of months. Adding jobless people who are not actively seeking work and people who are underemployed result more than 17%. Such statistics may indicate that the stimulus measures failed to create jobs as it was initially expected.

Some of technical indicators signal a lasting momentum that may keep the recent uptrend cycle for several weeks ahead. However, the third quarter earnings reports may not be so optimistic to sustain an existing stock market evaluation. In this case, major stock market indexes may have a correction if more negative news add the pressure.



The chart above shows S&P-500 forecast for the period from October 11 to October 22, 2010. The calculation has been performed using Neural Network Stock Trend Predictor NNSTP-2. The forecast is a slight uptrend.

Spring 2010: A Short-term Outlook for Stock Market Is Positive

Retailers and consumer discretionary stocks demonstrate a strong performance. Retail sales posted a surprising increase in February (sales rose 0.3%). Although some analysts doubt that the spending gains can be sustained since the unemployment rate still remains high (9.7% in February), fundamentals of many companies gradually started showing improvements.

If the overall US national debt over the next few years rises to 100% of the gross domestic product, it will be alarming signal for the International Monetary Fund and international markets. However, many economists believe that US will be able at least keep the national debt stable relative to the size of the economy.

More positive news:
Recovery hope
It is still manageable at the current level of US federal budget deficit

...and negative ones:
Congressional estimates
Dead Cat
Death of American Capitalism
Wall Street Loses
US debt will keep growing even with recovery

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Nothing in this piece or in this blog should be construed as investment advice in any way. Always do your own research or/and consult a qualified investment advisor. It is wise to analyze data from multiple sources and draw your own conclusions based on the soundest principles. Be aware of the risks involved in stock investments.