This weekend many economists and investors are expecting China to raise interest rates to cool off their sizzling economy. The Chinese have already increased bank reserve requirements six times this year in hopes to cool inflation and excessive speculation in housing. These actions by the Chinese central bank have caused the iShares FTSE/Xinhua China 25 Index(NYSE:FXI) to remain at the low range of the daily chart. The FXI should have daily chart support around the $41.75 area which is around the daily 200 moving average. Almost every market in the world is being effected by the Chinese economy, therefore, this market must followed closely on a daily basis.
Today is a Friday and as we have all learned by now the market rarely experiences a sharp decline on a Friday. In the past 2 years there have only been about a dozen Friday trading sessions that have been down more than 100.00 points on the Dow Jones Industrial Average. The reason for this is because the major institutions that can move the markets do not want to cause panic over the weekend. Remember the weekend is when the U.S. consumer will spend money. Consumer spending stimulates the economy and that is the only way that operations such as quantitative easing by the Federal Reserve will work for a while. Please remember that U.S. consumer spending accounts for 70.0 percent of the gross domestic product in the United States. The major institutions also do not want to scare the Asian markets over the weekend. Remember this is now a global economy and every region in the world will have an effect on another part country or economy.
On Friday’s we usually look for a flat trading day. Often when the SPDR S&P 500 Index Trust(NYSE:SPY), or the SPDR Dow Jones Industrial Average(NYSE:DIA) trades sideways for most of the trading session the market will often spike in the final thirty minutes of the day. This notoriously happens when the trading volume is extremely light.
Nicholas Santiago
Chief Market Strategist
www.InTheMoneyStocks.com
