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Saturday, May 12, 2012

China Rate Cut will temporary boost stock market.

China's central bank cut the amount of cash that banks must hold as reserves on Saturday, freeing an estimated 400 billion yuan ($63.5 billion) for lending to head-off the risk of a sudden slowdown in the world's second-largest economy.

The People's Bank of China delivered a 50 basis point cut in banks' reserve requirement ratio (RRR), effective from May 18, the third cut in six months and one that investors had called for after data on Friday showed the economy weakening, not recovering, from its slowest quarter of growth in three years. This rate cut will boost stock market. Also, GLD, AGQ, IAU, SLV will rise as Gold and Silver will rise as dollar will be weaken. EUR/USD will rise and USD/CAD will fall. You can short or buy put in GLL, ZSL.

This move will temporary boost stock market but Greece and Spain will keep a check on this market. Greece is yet to form government and their last effort by Pasok leader Evangelos Venizelos failed to get support. Now Greece President Papoulias will now hold meetings with the three political leaders that received exploratory mandates at noon on Sunday. If this meeting fails, then Greece will have no choice but to conduct another election as soon as possible.

Based on the chart market was expected to fall or open lower but a rate cut in China will reverse thing and market is now expected to open higher on Monday.

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For upside Dow needs to break 12908 key resistance and for downside Dow needs to breaks 12765.

1 month chart of Dow is at a point where it can go both higher and lower.

For upside S&P500 needs to break 1365 and for downside S&P500 needs to break 1348

1 month chart of S&P500 is bearish but a high leg up on Monday could change things into bullish
There is no economic data from US and just one data of Euro zone industrial production is coming out of Europe so stock market will move on the outcome of Greece meeting and China rate cut.

Earnings before market open:  A, CIG, IOC, KIOR, MOBI, SLW.

Earning after market close:  AL, ASEI, CSOD, CYCC, VOXX, OPNT, LPR, SUMR.

After hours big gainerHCKT, BRCD, LEAP, GTAT, AMRN, CHK, AEO, FIO

After hours big loser:  FRO, PSX, BSX, MTGE, CELL

For day trading watchout BIDU, AAPL, PCLN, MA, V, FAS, FAZ, TZA, TNA, TVIX, XIV, SVXY, UVXY, VXX, SPY, DIA, GLD, AGQ, INFY (remember volatility is not a long term investment option use it for strictly day trading) VIX is still in contango so any rally in it would lead to sell off at close. So becareful with UVXY, TVIX, VXX.

Invest after May 17th. Goodluck.

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