Wall Street: Aiming beyond 'the range'

Analysts say that hope for long-term rally quashed by high oil prices and Fed's interest rate hikes.

May 27, 2005: 2:03 PM EDT

NEW YORK (CNN/Money) - Wall Street is looking for signs that the stock market may break out of its range-bound existence but market watchers say the likelihood of a sustainable rally depends on energy prices and the long-term prospects for interest rates.

It's been a bumpy ride for the market since stocks bottomed out in October of 2002. Since then the Standard & Poor's 500 has rallied about 55 percent off its low. The market emerged from a three year slump in 2003, posting solid gains that helped account for a large portion of the S&P 500's recovery. 2004, however, was marked by uncertainty ahead of the presidential election and stocks have since traded narrowly between a 2004 low of 1,063 and a 2005 high of about 1,220.

The market's been unable to break above its recent highs as soaring oil prices and uncertainty over the Federal Reserve's plans for raising interest rates have fueled caution among investors.

There's been some optimism in recent days that the Federal Reserve may be close to putting the brakes on rising interest rates as economic data showed fairly benign inflation concerns. And that could be the shot in the arm the market needs to break out of its range.

"Historically, the three-month period before the Fed goes on hold in the rate hiking cycle, stocks have performed well and that carries on for the next 12 months," said Michael Sheldon, chief market strategist at Spencer Clarke LLC.

"The mood of the market has clearly improved in recent weeks and this most likely reflects optimism that the Fed is close to the end of its recent rate tightening cycle."

He added that if the Fed decides to move to the sidelines, the market could enjoy a rally in the second half of the year.

The Fed has raised short-term rates eight times since last summer, ending a prolonged period of super cheap money, as the central bank tries to ward off inflation.

But energy prices are an ongoing worry.

Oil prices, which recently traded at about $51 a barrel, serve as an invisible tax on consumers and businesses alike, impacting capital and consumer spending which puts pressure on the economy.

Market strategists said there's concern that if oil prices climb to $60 a barrel, that would have a negative impact on stocks.

The market also needs to improve its volume from a technical perspective in order to make some headway, said Frank Gretz, technical analyst at Shields & Co.

He said the market is in a trading range with a bias to the upside. But actual buying has been tepid with half of volume coming from computer-driven "program trading" rather than institutional or individual investors.

Analysts said many investors are still opting for caution, although the mood on Wall Street has turned fairly upbeat, at least in the short term.

Peter Cardillo, chief market analyst at S.W. Bach, said the market is on its way to test its yearly highs.

The Dow Jones industrial average hit a trading high in March just shy of 11,000, with the S&P 500 at about 1,229.

The Nasdaq composite, which saw some solid buying in recent days as investors rotated into the beaten down technology sector, hit a trading high of about 2,190 in January.

Cardillo said improving investor confidence is pulling the economy out of its soft patch but it's unlikely the market will break above its ceiling until there is confirmation that the Fed plans to put its rate-raising campaign on hold.

He expects the Fed to continue to raise rates at a measured pace through the third quarter of the year.

Citação de: notiCIas em Maio 28, 2005, 12:52
The market also needs to improve its volume from a technical perspective in order to make some headway, said Frank Gretz, technical analyst at Shields & Co.

He said the market is in a trading range with a bias to the upside. But actual buying has been tepid with half of volume coming from computer-driven "program trading" rather than institutional or individual investors.

Analysts said many investors are still opting for caution, although the mood on Wall Street has turned fairly upbeat, at least in the short term.

Importante esta questão do volume, que por estar fraco tira alguma força ao actual movimento de alta, tornando-o vulnerável a um aumento em sentido oposto.  É um pormenor a ter em atenção para o próximos tempos.

Aumento de volume em sentido descendente, poderá anular rapidamente todo o trabalho das últimas sessões.

Noticias

Porque trouxe mais uma noticia Bull do companheiro Cardillo ,+1 ponto.

Como diz o companheiro Cardillo os mercados querem testar os máximos anuais .

O SMi já o fez , eo DAX está quase a bater o seu máximo anual.

Cumprimentos e bons negócios

fisher

Nota: O Dax também já bateu o seu máximo anual