Tuesday, March 16, 2010

The U.S. Dollar is trading lower ahead of this afternoon’s FOMC policy meeting. This weakness is helping to boost April Gold prices overnight. The recent break in gold stopped short of the late February bottom at $1088.50 to maintain the uptrend.

Buyers came in on Monday to support prices after the hard sell-off in the British Pound triggered concerns that the currency would collapse over concerns about its ability to service its debt and a possible cut in its credit rating. As long as this is an issue, look for buyers to support gold as they debate whether hard assets are a better investment than paper currencies.

Stock indices are trading higher this morning boosted by demand for higher yielding assets. On Monday, the market turned around late in the session, proving once again that investors like to buy dips. As long as stocks continue to provide a positive return, look for investors to maintain their upside bias. At this time there aren’t many investments around offering a high yield which should keep investors interested in the ...

Monday, March 15, 2010

A drop in Asian equity markets is leading to spillover selling in the U.S. markets. The followthrough to the downside overnight appears to be a continuation of the sharp break from the high on Friday. Concerns over a credit rating cut in the U.K. and the lack of a bailout plan for Greece are two reasons for the selling pressure. This morning’s weakness will be a good test of investor demand since they have grown accustomed to buying dips throughout the recent rally.

Trader demand for safety is helping to underpin the June Treasury Bonds. Friday’s closing price reversal bottom has not been confirmed yet, but a sharp break in the equity markets is likely to drive up demand for safer, lower-yielding assets.

April Gold is trading higher despite the stronger Dollar. This is an indication that investors are becoming concerned about the possibility of a sharp decline in the British Pound. The threat of a downgrade from Moody’s is pressuring the Pound and raising concerns about its ability to cover the servicing of its sovereign debt. ...

Friday, March 12, 2010

Stocks Poised to Continue Rally; Demand for Risk Weakens Dollar

Retail Sales just came out bullish. Equity markets are soaring. Bonds are breaking. The Dollar is plunging. The market reads this report as good. The key will be to be able to separate the report from the trade. The question is will U.S. investors chase equity market higher or wait for a pullback? Overall, however, it looks like a strong report.

U.S. equity markets are trading better overnight ahead of this morning’s Retail Sales Report. Demand for higher risk assets, the weaker Dollar and low volatility are helping to support the indices. The March E-mini daily swing chart has been projecting a test of 1156.00 by March 12th. Strong overnight action has this market in position to test this level. In addition the March E-mini Dow chart shows this market has room to run to the upside with the January high at 10687 the next likely target.

Demand for risk is pressuring the June Treasury Bonds. This market is currently testing a major 50% price at ...

Thursday, March 11, 2010

U.S. equity markets are expected to open weaker this morning but off their lows. Last night’s news that China’s inflation was higher than expected, fueled speculation of a rate hike which helped drive down demand for higher yielding assets. The lack of follow-though to the downside has triggered a short-covering rally which is helping to boost equity prices from their overnight lows. Yesterday the March E-mini S&P 500 stopped at its January high of 1148.00, triggering a profit-taking break. The overnight rally from its low and building momentum could trigger another test of this level today. The daily swing chart suggests a breakout over this level will ignite a rally to 1156.00 by March 12th.

June Treasury Bonds are trading lower. Traders are selling Treasuries in anticipation of a rate hike by China. Technically, this market is hugging a 50% line at 116’04. This price will dictate the direction of the next move. Holding above it means the market is discounting the news. Falling below it will indicate a further drop to 115’06. Today’s Weekly Initial Claims Report should ...

Wednesday, March 10, 2010

Stocks Continue to Rally despite Drop in Volatility

U.S. equity markets are trading firm overnight after yesterday’s surge to the upside. Buying pressure dried up late in the session, but no damage was done to the uptrend. Volatility is falling which is making traders appear complacent. This could be both good and bad. On the good side, it could mean traders are gaining confidence in the recovery which will send prices higher. On the bad side, too much complacency leaves the markets vulnerable to a bearish surprise or could trigger the start of a sizeable correction. At this time let’s just focus on the trend and determine what it is telling us. The main trend is up in the March E-mini S&P 500. The swing chart indicates 1156.00 is the next upside target by March 12th.

June Treasury Bonds are trading lower but finding support at a 50% level at 116’04. If this area fails to hold, then look for a further correction to 115’24. A pick-up in demand for risky assets and additional supply concerns is putting ...

Tuesday, March 9, 2010

The lack of major economic reports today means the direction of the Dollar is likely to exert more influence on the U.S. equity markets. With the Dollar up overnight because of risk aversion, traders are selling equities. Yesterday’s tight trading range and lack of follow through during the New York session may have been indications that the stock markets are overbought. The daily March E-mini S&P chart suggests that a break through 1128.75 may accelerate the move to the downside.

June Treasury Bonds are trading better overnight as traders shift money out of higher risk assets and into the lower-yielding, lower-risk Treasuries. In addition, short term support has been reached at a 50% level at 116’04.

April Gold is feeling pressure because of the stronger Dollar. In addition, a report that China may be buying less gold in the future is hurting demand for the precious metal. This morning, gold is testing minor support at $1117.20. A break through this level could trigger a further break to $1110.40.

The strengthening Dollar and weaker demand ...

Monday, March 8, 2010

U.S. equity markets are expected to open better this morning due to a pick-up in demand for higher yielding assets. Investors are also feeling more confident in the long side following last Friday’s better than expected Non-Farm Payrolls Report. The lack of fresh major economic news until at least Thursday could keep the indices on course for further upside action. The daily March E-mini S&P 500 chart indicates the possibility of a rally to 1156.00 by March 12th.

June Treasury Bonds are expected to be under pressure today. Traders are still adjusting positions following last Friday’s improved jobs news. Investors are factoring in the prospect of an interest rate hike by the Fed before the end of the year. The daily chart suggests that a move to 116’04 is likely. Watch for a technical bounce on the first test of this level. Despite the weaker Dollar, April Gold is trading lower. This market is having trouble attracting buyers at a 50% level at $1136.75. Liquidation by traders hoping for the demise of the Euro may be holding back gains. ...

Friday, March 5, 2010

U.S. equity markets are trading higher ahead of this morning’s U.S. Non-Farm Payrolls Report. Appetite for risk is up overnight which could spillover to the U.S. markets if the jobs number shows that the economy is improving.

June Treasury Bonds are trading slightly lower. Holding 117’23 is the key to sustaining the rally in this market. The next upside target is 118’17. A break back under 117’23 could trigger a sharp break to 116’04. Today’s jobs report will move this market. If fewer than 50,000 jobs are lost then look for T-Bonds to break. A greater than expected loss will be bullish for TBonds. The direction of April Gold and June Crude Oil will be dictated by the movement of the Dollar. A weaker Dollar should increase demand for riskier assets which will drive up gold and crude oil.

The U.S. Dollar is trading mixed overnight ahead of this morning’s Non-Farm Payrolls Report. Demand for risky assets is up overnight putting pressure on lower yielding currencies. Traders are looking for a loss of about 50,000 jobs. This ...

Thursday, March 4, 2010

U.S. equity markets are trading flat to lower ahead of this morning’s weekly jobless claims report. In addition, investors seem to be taking a non-committal approach in front of tomorrow’s U.S. Non-Farm Payrolls Report. The Forex markets indicate that investor sentiment is shifting back toward risk aversion which could pressure equity markets today. A downside break could be led by the Dow and NASDAQ which posted closing price reversal tops yesterday.

Demand for lower yielding assets is helping to give June Treasury Bonds and June Treasury Notes a slight lift this morning. A rapid acceleration to the downside in the equity market could lead to more upside pressure in the Treasuries. The key area to watch in the T-Bonds is 117’23. Regaining this area will be a sign of strength.

The stronger Dollar is helping to keep April Gold on the defensive. Currently this market is trading lower while sitting on a major 50% level at $1136.75. Bullish traders will try to create support at this price in order to set up another rally to perhaps $1158.52. ...

Wednesday, March 3, 2010

Stocks Trading Flat Ahead of ADP Jobs Report

Besides news regarding the debt crisis in Europe, futures and Forex traders will be focusing on today’s Challenger jobs report and the ADP private sector jobs report for direction. Traders expect the ADP report to show a loss of 20,000 jobs. An amount greater than 20,000 should support the Dollar as it will indicate a weaker economy. Later in the day, the Fed releases the Beige Book of economic conditions.

U.S. equity markets are trading flat to lower ahead of the job data reports. In addition, traders are reacting to the mixed news that is coming out of the Euro Zone. This news seems to be changing by the hour which is helping to create investor indecision and some light volatility. Yesterday U.S. stock indices opened higher but failed to maintain the upside momentum throughout the day and weakened into the close. Investors seem to be nervous about holding risky positions which could lead to a profit-taking break today. Worse than expected jobs data is expected to lead to ...

Tuesday, March 2, 2010

Investor optimism over a resolution to the sovereign debt problem in Greece and improvements in the U.S. economy are helping to boost U.S. equity markets following a change in trend to the upside on Monday. Traders expect the trend to continue today as the charts indicate very little resistance to the upside. The lack of major economic reports today indicates that traders are likely to focus on any new developments coming out of Greece. The key to an early rally will be whether U.S. investors decide to chase the markets higher after a strong overnight gain. If buyers back off, then look for an early retracement to the downside.

Treasury futures are trading lower as sovereign debt fears eased demand for lower yielding, lower risk assets. After reaching resistance at 118’24, the June Bonds may see a short-term correction to 116’00 over the short-run.

The possibility of a weaker Dollar because of optimism that a deal will be reached between Greece and the European Union is helping to boost demand for higher risk assets, thereby underpinning ...

March 1, 2010

U.S. stock indices are trading better this morning ahead of the U.S. session. Although they are off their highs, there seems to be enough demand for higher risk despite the strengthening Dollar and the falling Euro and British Pound. This could mean that traders are confident that the EU and Greece are close to reaching an agreement regarding the budget deficit crisis or it may be a vote of confidence in the U.S. economy. Traders may turn against risk if the Euro continues to weaken.

Today’s U.S. economic reports may have some say in the matter. Personal income is expected to show no growth while consumer spending is predicted to show a modest gain. The ISM Manufacturing Index has been up for 6 straight months, but this month is called flat. The predicted range is 55 to 60. Finally, Construction Spending is called lower. The drop in home sales should have a negative influence on construction spending. Early guesses for Friday’s Non-Farm Payrolls Report is for a loss of 50,000 jobs.

June Treasury futures are trading lower. Traders don’t seem ...

Friday, February 26, 2010

Despite a pick-up in demand for higher risk assets and higher Asian equity markets, U.S. stock indices are predicting a flat to lower opening. Traders seem to be taking a cautious approach before the release of this morning’s U.S. GDP, Chicago PMI, consumer confidence and existing home sales reports.

Treasury markets are trading higher this morning. Investors appear to be anticipating U.S. economic reports to come out lower than expected. This will keep the pressure on the Fed to keep interest rates down.

The weaker Dollar is helping to support both April Gold and April Crude Oil. A stronger Dollar is likely to keep downside pressure on commodity markets. Any flare-up in Greece should send traders into gold.

Concerns about sovereign debt issues in Greece eased overnight helping to increase demand for higher risk assets. In addition, good economic news from Japan and higher stock markets in Asia helped increase optimism over the global economic recovery.

With tensions easing regarding the sovereign debt problems in some of the European Union nations, ...

Thursday, February 25, 2010

Today, Fed Chairman Bernanke will continue his testimony before the House Financial Services Committee. Yesterday he said the U.S. economic recovery has been “nascent” and requires low interest rates to help it sustain growth. He also said that low employment and subdued inflation allow the FOMC to keep downside pressure on interest rates.

Today’s January Durable Goods Report came out better than expected, but that wasn’t enough to help the equities. Stock indices are down on the news that initial claims rose by 22,000 to 496,000. Traders had been looking for a decrease.

U.S. stock markets are under pressure overnight because of another shift in risk sentiment. Sovereign debt issues in Greece are putting fear into traders triggering liquidation of risky asset position. It’s highly doubtful that Bernanke will say anything today which can turn this market around so traders should look for downside pressure throughout the day. A break through 1090.00 in the March E-mini S&P 500 could trigger a further decline to 1084.50.

March Treasury Bonds and March Treasury Notes soared to ...

Wednesday, February 24, 2010

U.S. stock indices are trading flat this morning ahead of the U.S. opening. Investors seem reluctant to take a side ahead of today’s testimony by Fed Chairman Bernanke. Today’s emphasis will be on jobs and the Fed’s exit strategy. Bernanke may be asked to explain how the Fed plans to withdraw stimulus and raise interest rates without shocking the financial markets. Dovish comments by Bernanke are likely to decrease demand for higher risk assets while putting pressure on equities. Hawkish comments, or hints at a rate hike this year could also trigger the start of a sizeable correction. The only thing investors can count on today is volatility.

Trading has been mixed overnight in the Treasury markets following a strong rally on Tuesday. Yesterday, investors bought T-Bonds and T-Notes after the release of less than stellar U.S. economic reports. Today, traders will react to any comments by Bernanke regarding interest rates. Talk of tightening will pressure March Treasury Bonds and March Treasury Notes.

If Bernanke’s testimony helps the Dollar then look for more pressure on Gold and ...

Tuesday, February 23, 2010

U.S. equity markets are expected to open lower as risk sentiment wanes a little following a drop in the Euro. Investors appear to be taking risk off the table over concerns about debt issues in Europe and a slow down in the U.S. economy. Traders will be focusing on the Case-Shiller Housing and Consumer Confidence Reports for direction. Investors are also uncertain about the Fed’s next interest rate play now that they have raised the discount rate. The great debate remains, will they or won’t they raise rates in 2010?

Aversion to risk and oversold conditions are helping to give Treasury futures a boost. While the stronger Dollar and weaker Euro is pressuring April Gold and April Crude Oil.

The U.S. Dollar is trading higher against all major currencies except the Japanese Yen as risk sentiment has shifted back toward safety. Investors are buying the Dollar and the Yen as they scale back their appetite for more risky investments.

Today, U.S. traders will focus on the S&P Case-Shiller HPI and Consumer Confidence Reports. Economists are predicting ...

Monday, February 22, 2010

U.S. stock indices are trading in a tight range overnight as investors await testimony before the House Financial Services Committee by Fed Chairman Bernanke. Expectations are for Bernanke to talk about the state of the employment situation as well as addressing whether more financial stimulus is required.

Investors will be looking for clues as to if or when the Federal Reserve will begin to hike interest rates in 2010. Signs that rates will rise will likely support the Dollar which could put pressure on U.S. stock markets. Technically, the March E-mini S&P 500 is indicating that this market wants to move higher. The overnight trade took out a .618 retracement level at 1107.00. This price is new support. A failure to hold this level could trigger a break to 1094.50.

Slightly better equity markets overnight are helping to pressure Treasury futures. Currently, the March Treasury Bonds are in a downtrend but trading inside a retracement zone at 117’01 to 116’14. Concerns over the Fed hiking interest rates are keeping bullish traders away from the long-side.

Friday, February 19, 2010

U.S. stock indices sold off after Thursday’s hike in the Fed discount rate. The immediate reaction by traders was to sell because many traders thought this move served as a sign that the Fed would begin tightening its monetary policy. The Fed, however, is emphasizing that this move is not a deviation from its policy statement that interest rates will remain low for an “extended period”. This news is helping to stabilize the stock indices, leading to a shortcovering rally overnight.

The March E-mini S&P 500 is still negative, but trading well off of its low. The current shortcovering rally indicates that yesterday’s late session break may have been overdone. Don’t be surprised if this market tries to regain the psychological barrier at 1100.00.

March Treasury Bonds and Notes sold off sharply after the Fed hiked the discount rate, but in a case of sell the rumor, buy the fact, they both turned positive overnight. Oversold conditions are most likely contributing to the rally. In addition, bond traders are buying into the Fed’s comments that the discount ...

Thursday, February 18, 2010

U.S. stock indices are expected to open flat this morning. The stronger Dollar on Wednesday kept a lid on prices despite better than expected U.S. economic news and a positive FOMC report from the Fed. The trading action shows that risk is still a concern for investors, and that traders are reluctant to buy strength. This may mean that another correction may be necessary to attract fresh buying. The psychological 1000 barrier in the March E-mini is providing resistance this morning.

The March Treasury Bonds turned the main trend to down following yesterday’s friendly U.S. economic reports. Without any new supply hitting the market this week, bond traders will be focused on the U.S. economy. Better than expected economic reports should continue to push yields up and bonds and March Treasury Notes lower.

News that the International Monetary Fund is getting ready to resume gold sales is pressuring the precious metal. It’s hard to tell at this time if there is enough liquidity available for the gold market to absorb the sales. More supply is leading to ...

Wednesday, February 17, 2010

U.S. investors are driving stock indices higher ahead of this morning’s housing starts and industrial production reports. Renewed confidence in higher risk assets is also contributing to the strength. Trading could slow down after the morning session as investors flatten out ahead of this afternoon’s FOMC minutes.

The charts indicate that the main trend remains down in the three major indices and that this current rally is being driven by short-covering following the recent sharp sell-off. At this time the March E-mini S&P 500 is trading inside a key retracement zone at 1094.50 to 1107.00.

March Treasury Bonds and Notes are trading a little lower. Short-covering could drive the March Treasury Bonds to 118’04 to 118’15. On the downside, a break under 116’23 will turn the main trend to down and could trigger an acceleration to the downside. Yesterday it was reported that China sold off enough Treasury investments in December to help Japan regain the title as the largest holder of U.S. debt. This could be a sign that China is concerned about the growing U.S. ...

Tuesday, February 16, 2010

Confidence that the European Union, Greece situation is close to a resolution is helping to drive up demand for risky assets. This is helping to boost the U.S. stock indices ahead of the opening. Traders are also becoming more confident in corporate earnings reports because of the recent improvements in the economy.

The improving economy and talk of higher interest rates by Fed Chairman Bernanke are helping to boost yields, thereby pressuring March Treasury Notes and March Treasury Bonds. Last week’s auction boosted supply which helped weaken Treasuries further.

The pick-up in demand for risky assets is helping to underpin April Gold and April Crude Oil. Gold is trading as if speculators anticipate a drop in the Dollar.

Greater appetite for risk is helping to pressure the Dollar overnight. Reduced demand for safer assets is helping to drive up higher-yielding currencies. The weaker Dollar is providing a boost for stocks and commodities.

Oversold conditions are helping to buoy the March Euro. Some traders feel that short traders may have overreacted to the ...

February 12, 2010

U.S. Stocks Mount Strong Recovery after Early Session Weakness

Equity markets finished nearly unchanged on Friday after a volatile and tumultuous trading session. The indices weakened in premarket trading following a surprise move by China’s central bank to curb excessive credit demands. Recent data has shown that China’s economy may be heating up too fast which could lead to an asset bubble in the real estate and housing markets.

Commodity markets were hit hard following the increase in the China bank reserve rate. This put selling pressure on commodity-linked stocks. Risk aversion returned to the markets which led to the early session sell-off.

Better than expected U.S. Retail Sales helped to give equity markets a boost, but news that consumer sentiment fell according to the Michigan Survey helped to limit early session gains. Thin trading conditions may have led to the late session strength.

The stronger Dollar put pressure on April Gold, erasing the vast majority of Thursday’s gain. The short-term chart indicates the possibility of a wide range next week with $1106.00 upside resistance ...

Friday, February 12, 2010

Equity markets are trading weaker overnight following a surprise move by China’s central bank to curb excessive credit demands. Recent data has shown that China’s economy may be heating up too fast which could lead to an asset bubble in the real estate and housing markets.

Commodity markets are getting hit hard following the increase in China bank reserves. This is putting selling pressure on commodity-linked stocks. Risk aversion is returning to the markets which could lead to downside pressure throughout the day.

The stronger Dollar is putting pressure on April Gold, erasing almost all of yesterday’s gain. The short-term chart indicates a move to $1071.50 is likely. Look for downside pressure throughout the day as long as the Dollar remains firms and traders averse to risky assets.

March Crude Oil is trading lower as demand is falling for commodities. The current chart pattern suggests that a break to $72.60 is likely over the short-term. Look for more downside action as long as the Euro remains under pressure.

Weaker commodity markets ...

Thursday, February 11, 2010

Strengthening Gold Market Indicates EU/Greece Pact is Imminent.

The strengthening April Gold market is a strong indication that the pact between the European Union and Greece is imminent, thereby driving up demand for risky assets. Speculators are anticipating that the agreement to shore up the debt in Greece will be released shortly. This news should pressure the Dollar and underpin the gold market.

March Crude Oil is trading sharply higher overnight after taking out a key retracement zone. Oversold conditions and the possibility of a weaker Dollar are helping to boost this market. Traders are looking for increased demand for risky assets to continue today. In addition, signs of an improving economy may increase demand for energy.

Equity markets are trading higher overnight. Confidence is returning to the markets. Traders feel that an agreement between the EU and Greece will increase appetite for risk and are buying in anticipation of the news. Tonight’s rally is being driven by Asia and Europe. The key to higher markets will be whether demand comes in from U.S. traders. ...

February 10, 2010

Stock Indices, gold and crude oil are trading relatively flat overnight. Yesterday’s strong buying has been met with uncertainty following the inability of the European Union to reach a loan guarantee agreement with Greece.

Investors are taking a cautious approach ahead of an EU announcement. The longer the EU delays the announcement, the more nervous traders will become, thereby forcing weaker longs out of the market. This could lead to general weakness today.

Today’s focus will be on appetite for risk. Simply stated, if the EU makes the announcement to guarantee Greece against sovereign default, then look for an increase in demand for risk to send stocks, gold and crude oil soaring. Otherwise, expect these markets to drift sideways-to-lower.

Treasury futures are up slightly. This could be a sign that traders are hedging against a down move in risky assets.

All major currencies are down versus the U.S. Dollar overnight after the European Union failed to deliver a resolution to the Greece sovereign debt problem. Yesterday, currencies, led by a rally in the Euro, ...

Tuesday, February 9, 2010

Global equity markets are up sharply after reports that the Greek sovereign debt problems will be resolved shortly. Stock investors are driving up indices as confidence is being restored to the markets. Bargain hunters are also stepping in to take advantage of lower priced equities.

Last night, the Dow closed under 10,000 for the first time since November 2009. Some read this as a bearish sign while other saw this as a chance to gobble up cheap stock. For days, the major indices had been trading as if waiting for a catalyst. The developing story out of the Euro Region could be the catalyst which drives these indices sharply higher today.

Treasury futures could be under pressure today. Demand for higher risk assets could lead to liquidation of safety plays put on by nervous investors the past few days. Additional pressure could be coming from the increase in supply from the upcoming Treasury auction. One sign of impending weakness is the penetration of a support level at 118’24.

The weaker Dollar is helping to trigger ...

Monday, February 8, 2010

An easing of investor risk sentiment is helping to support equity price overnight. Early in the trading session, stock markets followed through to the upside following Friday’s strong finish and talk of a possible resolution of the fiscal problems plaguing the Euro Region.

Appetite for risk was on the rise as the Dollar weakened and the Euro rose. Optimism that a viable solution could be reached to assure investors that Greece would adhere to its budget, helped drive investor confidence up. It looks as if today could start out choppy until investors decide whether to embrace risk or repel it.

March Treasury Bonds are trading lower. The overnight weakness is being triggered by a combination of falling demand for lower risk assets and the new supply of debt which is ready to come to the market courtesy of the U.S. Treasury. Overnight support is being established at a 50% level at 118’24. A failure to hold this level is likely to trigger an acceleration to the downside.

The weakening Dollar helped April Gold rally ...

Friday, February 5, 2010

Today’s U.S. Non-Farm Payrolls Report appears to be taking a backseat to the fear that sovereign debt woes in the Euro Region will escalate. Traders continue to monitor the financial difficulties in Greece while keeping one eye on the key U.S. jobs report. This morning’s report is expected to show that 25,000 jobs were added last month. This is down from a guess of 40,000 earlier in the week.

Key retracement levels were violated in the March E-mini S&P 500 yesterday. Look for continued weakness with 1069.50 the nearest resistance. The charts indicate there is room to the downside with 1021.00 a potential near-term target. Today’s jobs data will have to blow away estimates or a solution to the fiscal problems in Greece will have to be reached in order to trigger a rally.

March Treasury Bonds continued higher overnight. Key support at 118’24 is holding which could trigger a rally to 119’24. A higher than expected jobs report will trigger a break in this market provided traders decide to focus on the economic outlook rather ...

Thursday, February 4, 2010

Commodity and stock markets are trading lower overnight as risk aversion is driving investors toward safer, lower-yielding assets. U.S. economic reports may have to take a backseat today as traders express their concerns with growing European sovereign debt issues by selling off higher risk assets. Trading may be volatile today as thin conditions ahead of tomorrow’s U.S. Non-Farm Payrolls Report continue to be the highlight.

The key level to watch in the March E-mini S&P 500 is 1084.50. Holding this level could attract buyers which will limit losses. A failure to build support at this level is likely to pressure this market further with 1069.50 the next downside target.

March Treasury Bonds are trading higher. This market could see a sharp rise to the upside if European debt worries continue to pressure equity markets. Traders may be encouraged to buy Treasury Bonds and Notes for safety. A medium-term view indicates that 118’24 is resistance. The developing downtrend pegs 116’06 as the next downside target.

The stronger Dollar is pressuring April Gold. Selling pressure has ...

Wednesday, February 3, 2010

U.S. stocks markets are trading flat ahead of this morning’s ADP Employment Report. Expectations are for this report to show that 30,000 jobs were lost during the last month. This is better than the 84,000 lost in December. Today’s ISM Non-Manufacturing Index Report should be a market mover today. Traders are looking for this index to cross over the important 50 barrier. A number higher than 50 indicates upside momentum.

The March E-mini S&P 500 is on target to test a major retracement zone at 1109.25 to 1118.25. A retracement to 1084.00 must hold if tested. The March E-mini Dow has an upside target of 10341. Look for support on a pullback to 10130. The March E-mini NASDAQ is lagging behind the two other markets. This markets needs to regain 1774.50 to show strength.

April Gold surged overnight to $1126.40 before backing down. This price was inside of a retracement zone at $1120.50 to $1131.40. A weaker Dollar is necessary for this market to continue its rise. If the Dollar strengthens, then look for a pullback to ...

Tuesday, Feb 2, 2010

A combination of oversold conditions and a weakening Dollar is helping to fuel a strong recovery rally in April Gold. After failing to attract fresh selling pressure following the break under the December bottom at $1076.50, this market formed a two-day support base before moving higher. Based on the short-term range of $1166.70 to $1074.40, traders should look for a retracement to $1120.50 to $1131.40.

U.S. equity markets could not follow-through to the upside overnight after yesterday’s rally. This may be indicating the possibility of a rangebound day. Last night’s news that the Bank of Australia passed on an interest rate hike could put a little pressure on the markets today. Traders are trying to decide if risk is on or off. On the bullish side, thinning volume because of this Friday’s U.S. employment report could mean the way of least resistance is up.

The March E-mini S&P 500 closed above the 50% price at 1084.50 which should help trigger further upside movement. The charts indicate a rally to 1107.00 is likely over the near-term.

Tuesday, February 2, 2010

The U.S. Dollar is trading mixed against most major currencies after a volatile, two-sided overnight trade. Thinning trading conditions and position squaring ahead of this Friday’s U.S. Non-Farm Payrolls Report is having an influence on this week’s trading action.

The Reserve Bank of Australia announced overnight that interest rates would remain unchanged at 3.75%. It is being reported that this was surprise news, but the handwriting was on the wall a couple of week’s ago when China decided to begin tightening its monetary policy. This led to speculation the Australian economy would be threatened which I believe was a major influence on the RBA’s decision. The RBA wants to see how recent events affect the economy before making its next decision.

The March Euro is trading better as pressures from the financial crisis in Greece seem to be fading. Investors expect to hear more upbeat news on Wednesday when the European Union releases its official opinion on Greece’s efforts to shore up its budget. Upside momentum could take this market back to the last main bottom at ...

Monday, February 1, 2010

U.S. equity markets are showing small gains overnight as traders begin lightening up positions ahead of this Friday’s Non-Farm Payrolls Report. Economic reports may take a backseat throughout this week as traders try to determine how the employment picture has changed during the month.

Many investors are banking on a slight increase in jobs because of government census hiring. The kicker will be whether businesses have seen enough improvement in the economy to warrant new hiring.

Investors continue to remain skittish about holding stocks because of less demand from China, problems in Greece and the Euro Zone and the prospect of weaker earnings later in the year.

Treasury futures are trading choppy overnight with a bias to the downside. Fear has been driving investors into the safety of the March Treasury Bonds and March Treasury Notes. The bigger picture still indicates that March Bonds are trading inside a major retracement zone at 118’24 to 119’24. A close under 118’24 will indicate weakness that could trigger the start of a break back to 116’06. ...

Friday, Jan 29, 2010

Better GDP Report Likely to Support Equity Rally

U.S. stock indices are likely to see fresh buying today since the GDP exceeded the consensus estimate of 4.5%. What this market needs right now is a shot of confidence, and news that the economy is improving at a better rate than forecast could be exactly what investors have been waiting for. The problem is whether investors will be paying more attention to past data such as the GDP or current reports regarding sovereign debt issues in Greece and Portugal.

If the situation in the Euro Zone continues to escalate and capture the bulk of the headlines, then look for investors to turn more risk averse. This would trigger a rally in the Dollar and pressure stock indices and gold. Overnight, the March E-mini S&P 500 traded down to .618 support before mounting a short-covering rally. This level at 1069.50 is now being read as major support. Regaining the 50% level at 1084.50 will be a sign of strength and could help form of a closing price reversal bottom.

Friday, January 29, 2010

The U.S. Dollar is slightly better against a basket of currencies this morning after trading in a tight and narrow range overnight. Trading action was subdued as investors await this morning’s key U.S. GDP data. The Dollar is trading higher versus the Euro, Yen and Aussie Dollar while weakening against the British Pound, Swiss Franc, Canadian and New Zealand Dollars. In addition to the GDP report, traders will also get the chance to react to the Employment Cost Index, Chicago PMI and Consumer Sentiment.

The Employment Cost Index is a measure of total employee compensation costs, including wages and salaries as well as benefits. Since the U.S. economy has become so sensitive to jobs related data, this report may carry some additional weight today. Last month’s report showed a rise in the index of 0.4%. This month, the range of this report is projected at 0.4% to 1.5% with the consensus at 0.4. Traders expect to see that continued high employment and salary freezes have kept employment costs soft.

The Chicago PMI is usually a market mover. ...

Thursday, January 28, 2010

Stock indices could rally today following yesterday’s closing price reversal bottom. A friendly Fed statement and an upbeat speech from Obama could be the catalyst behind this rally. Investor confidence seems to have been restored which has once again generated interest in higher risk assets.

The March E-mini S&P 500 has formed a range between 1148.00 to 1078.50. This makes 1113.25 to 1121.50 a potential upside target. The charts are also indicating a possible rally to 1842.00 to 1855.50 in the March E-mini NASDAQ and to 10371 to 10445 in the March E-mini Dow.

Demand for higher yields is pressuring the March Treasury Bonds and March Treasury Notes overnight. Yesterday’s Fed report signals that it is getting closer to hiking interest rates. The news that the Fed is going to end its quantitative easing program on schedule at the end of March could put upside pressure on yields. Tuesday’s closing price reversal top which started inside a major retracement zone is helping to pressure the March Bonds. All indications are for a possible break ...

Wednesday, January 27, 2010

U.S. equity markets are trading flat to better ahead of this afternoon’s Fed interest rate policy announcement. Traders will most likely be focused on whether the Fed votes to extend or end its mortgage buyback program as this will have a direct effect on the U.S. housing industry.

If this announcement turns out to be a non-event, then stocks could feel pressure as the focus will shift back to the possible developing slowdown in the global economy. This news has been causing traders to take risk off the table as traders seek shelter in lower risk assets.

Treasury futures are trading flat to higher. Look for Treasury futures to rise if the Fed votes to extend its mortgage buyback program. This stimulus measure has kept pressure on interest rates.

The direction of February Gold will be dependent on the direction of the Dollar. A stronger Dollar will put pressure on precious metals. Any hint at higher interest rates is likely to drive the Dollar higher and gold lower. A surprise announcement about inflation will ...

Tuesday, January 26, 2010

U.S. equity markets are called to open lower after a volatile Asian trade triggered by a possible debt rating cut in Japan and another sign that China is serious about tightening its monetary policy.

Yesterday’s gains were erased overnight before the markets mounted a strong comeback. The activity in Asia indicates that sentiment is shifting toward aversion to risk, however the early morning comeback indicates that traders will be influenced by today’s U.S. S&P Case-Shiller Home Price Index and the Consumer Confidence Report.

Treasury futures are once again trading higher because of increased demand for safer assets. Traders leaving equity markets are flocking into the Treasuries, driving down yields. Look for March Treasury Bonds and March Treasury Notes to continue to rally as long as traders prefer to take risk off the table.

February Gold is trading lower. The stronger Dollar is helping to pressure precious metals this morning. New that China is serious about tightening their lending requirements as well as their monetary policy is also encouraging liquidation of speculative positions in precious ...

Monday, January 25, 2010

U.S. equity markets are expected to open better this morning following last week’s hard selloff. Investors dumped stocks late last week as sentiment shifted toward less risky assets. The combination of a stronger Dollar, monetary tightening in China and a proposal by Obama to end financial institution prop trading weighed heavily on traders last week. While these conditions are expected to continue to linger this week, the bulk of the focus will be on the Fed FOMC meeting which takes place on January 27th. Traders will be looking for clues as to when the Fed will decide to begin to raise interest rates.

Treasury futures are trading lower overnight as demand for lower yielding assets dropped overnight in Asia and Europe. Demand for safety helped to lower yields and boost the March Treasury Bonds and Treasury Notes last week. This bodes well for the next auction because it looks as if the Treasury will be able to offer lower yields. Supply concerns are likely to limit gains, however.

February Gold is mounting a strong comeback following ...

Friday, January 22, 2010

U.S. equity markets could feel downside pressure if President Obama’s plan to end trading by financial institutions becomes a law. Investors feel this proposal will have a negative impact on bank earning’s which could weaken their stock prices. In addition, the proposal is making the Dollar less attractive.

Technically, the March E-mini S&P 500 changed the trend to down on the daily chart with its move through 1109.75. A retracement level at 1105.00 stopped the slide, however. Holding this level could trigger a retracement rally to 1126.00. A break through 1105.00 could send the market to 1100.00 then 1095.00.

Demand for safety is helping to lower yields and boost the March Treasury Bonds and Treasury Notes. The March Bonds penetrated a swing top at 119’08 but failed to attract follow-through buying. This market is currently trading inside the retracement zone of the 123’00 to 114’16 range. This zone is at 118’24 to 119’24. Profit-takers could come in if stocks begin to strengthen.

February Gold is still trading down despite the weaker Dollar. It looks ...

Thursday, January 21, 2010

Despite a move by China to tighten its monetary policy, U.S. equity markets mounted a strong recovery late in the trading session on Wednesday. This served as a sign that there is plenty of money on the sidelines and that investors continue to maintain a “buy the dips” mentality.

The March E-mini S&P continues to show strong support at the .618 retracement level of 1124.00. The only obstacle in the way is the high for the year at 1148.00. Volatility has picked up considerably the past three days, highlighted by triple-digit moves in the Dow.

The market has been hit by bearish news all week, but continues to show resiliency. Although a change in trend is unlikely at this time, the S&P 500 still remains vulnerable to a short-term correction to 1105.00. Some traders may be lured into buying a dip today because of the action the past few days, but if you follow the “Rule of 3”, the next break is likely to fail, triggering a sizeable break.

Demand for safety has been ...

Wednesday, January 20, 2010

U.S. Stock markets backed off from Tuesday’s strong closes overnight as China took moves to limit lending in an attempt to slow down the economy. The news sent shockwaves through global equity markets as the Shanghai index dropped 3%. Traders are concerned that less spending from China will derail the global economic recovery.

Last night IBM reported strong earnings but this news couldn’t carry the market. Investors may have been standing aside while awaiting the special election results from Massachusetts. The news that Republican Brown defeated the Democratic machine could pressure healthcare stocks, but insurance stocks may benefit if the current healthcare plan gets defeated.

Today could be a volatile day. The stronger Dollar indicates that investors are looking for lower yields and safety. This could weigh on higher yielding, higher risk assets like equities.

March Treasury Bonds and Treasury Notes are trading higher. Traders are driving down yields as they seek shelter from falling equity markets. If safety remains the theme throughout the day, then look for more appreciation in bonds and notes. ...

Tuesday, January 19, 2010

U.S. equity markets are trading overnight and are expected to open slightly above near-term support. The March E-mini S&P 500 broke an uptrending Gann angle at 1132.25 which has held as support since November 27th. This is a sign of impending weakness. Short-term support is a retracement zone at 1129.00 to 1124.50. Once this zone is broken, the next downside targets will be 1105.00 and 1095.00. The fear of higher interest rates is helping to shift sentiment out of higher risk assets.

The short-term trend is up in the March Treasury Bonds, but the market appears to be stalling inside of a retracement zone at 116’28 to 117’14. Last night’s attempt to breakout to the upside appears to be failing, setting up this market for a potential closing price reversal top. For a while, the strategy used by traders has been sell bonds and buy stocks, but recent action suggests that this strategy may be shifting. Traders should be aware that it is possible that the threat of a rise in interest rates could pressure both equities and fixed income ...

Friday, January 15, 2010

Stock Index Futures are trading lower overnight as investors are shifting out of higher risk assets. Concerns that a tighter monetary policy in China will lead to a slow down in the Chinese economy is encouraging traders to lighten up on higher yielding assets. Traders are also being cautious ahead of today’s earnings reports. Momentum has slowed down despite higher prices this week. Investors are worrying about taxes, bank fees and the healthcare package, and their possible negative impacts on the economy.

Treasury futures are trading higher this morning after a strong turnaround on Thursday. Strong demand for Treasury Bonds at yesterday’s auction helped send yields down and prices up. Falling demand for risky assets could drive more money into fixed income instruments today.

February Gold is trading lower because of the stronger Dollar. News that China’s economy may actually slow down is also triggering lower demand for raw materials. In addition, a slowdown in demand from China will lessen gold’s appeal as a hedge against inflation. The inability to rally back to $1151.00 yesterday is a ...

Thursday, January 14, 2010

Equity markets are flat as traders await this morning’s U.S. Retail Sales Report. Based on previously released new motor vehicles sales and December Chain-Store Sales, traders should expect a healthy report. Look for retail sales to grow by 0.4% and retail sales less autos to increase by 0.2%. Today’s jobless claims report should show an increase of 3K with a range of 400K to 450K.

A bullish report is likely to trigger an upside breakout over this week’s highs. The March E-mini S&P 500 is currently in a position to take out its recent minor top at 1148.00. A weaker report may trigger a set-back to 1129.00, but investors are likely to step in to buy this break.

March Treasury Bonds sold off sharply yesterday as traders dumped safe assets in favor of higher risk assets. A bullish Retail Sales Report is likely to pressure T-Bonds today as traders will once again begin to factor in the possibility of a Fed rate hike. A weak report should be supportive if investors sell off higher risk assets. 116’05 ...

Wednesday, January 13, 2010

U.S. equity markets are called steady to better this morning. The lack of follow-through to the downside following yesterday’s sell-off is triggering a short-covering retracement rally. Earnings, bank fees and taxes are on the minds of traders today which could lead to limited gains. The March E-mini S&P 500 is likely to stall following a rally to 1137.75. Yesterday’s break stopped inside of a short-term retracement zone at 1129.00 to 1124.50.

March Treasury Bonds are giving back some of Tuesday’s gains after testing a 50% price level at 116’28. Regaining this level could trigger a further rally to 117’14. On the downside, look for a pull-back to 116’05. Talk of higher interest rates from Fed President Plosser and in the U.K. is pressuring fixed income instruments today.

February Gold is trading slightly better but in a narrow range. Overnight volatility in the Dollar has traders confused about the direction of this market. The chart indicates a move to $1119.10 to $1108.80 is likely over the near-term. A rally today is likely to be short-covering. Look for new ...

Tuesday, January 12, 2010

Global stock markets weakened overnight after Alcoa released mixed results following yesterday’s close. In addition, news that China may begin raising interest rates is pressuring demand for higher yielding assets. Commodity related stocks may feel pressure today because of an expected drop in demand for raw materials. Bank stocks may also drag the markets lower because of a proposed fee by the Obama administration on banks that received federal aid during the credit crisis. The charts indicate the March E-mini S&P 500 is set-up for a near-term break to 1129.00 over the near-term.

March Treasury Bonds are expected to see buyers today following a pick-up in demand for safer assets. The current chart formation is potentially bullish because of the support base that has been built. Watch for a sharp acceleration to the upside following a breakout over the last main top at 116’05.

February Gold is faltering overnight following a rally to $1151.30. This move completes a 50% retracement of the $1227.50 to $1075.20 range created from December 3rd to December 22nd. The stronger Dollar ...

Monday, January 11, 2010

U.S. equity markets are expected to open stronger as traders renew their demand for higher risk, higher yielding assets. Without any economic reports to concern investors, expectations are trend day. There may be a break early in the session as U.S. traders have been reluctant to chase this market after higher openings. Earnings season begins after the close today.

Demand for higher yields is pressuring the March Treasury Bonds and March Treasury Notes. Traders are attempting to raise the yields in Treasuries to keep up with the high yields in the stock market.

The weaker Dollar triggered a strong surge in February Gold. The first upside objective at $1151.30 was reached fairly easily overnight. The next upside target is $1169.30.

News of strong demand from China during December helped trigger an upside breakout in March Crude Oil. Imports were up a whopping 24% during the month. Upside momentum, increased demand and a weaker Dollar could drive this market to 90.00 this week.

The U.S. Dollar is trading sharply lower as China reported ...

Friday, January 8, 2010

U.S. Equity markets are trading flat ahead of this morning’s jobs report. A friendly U.S. Non-Farm Payrolls Report is likely to trigger a rise in stocks today as it will signal the economy is on the path to recovery.

Treasury futures could feel downside pressure today if the Non-Farm Payrolls number comes out much better than expected. A strong report will signal that the Fed is getting closer to hiking interest rates. This would be negative news for March Treasury Bonds and Treasury Notes.

February Gold is likely to feel downside pressure if the Dollar rises. The daily chart indicates that a break to $1108.10 to $1100.40 is likely over the near term if the Dollar accelerates to the upside.

The trading picture could be mixed in March Crude Oil. A bullish jobs report may trigger a rally because it indicates that the economy is improving which could lead to an increase in demand for crude oil. On the bearside, a rise in the Dollar could pressure commodity prices. Watch for volatile trading today ...

Thursday, January 7, 2010

The U.S. Dollar erased early overnight losses and is now trading higher after China shocked the Forex markets with a surprise hike in interest rates. China’s move to curb excessive lending and curtail price increases drove traders into lower yielding, safe haven currencies. China’s central bank sold 3-month bills at a higher interest rate for the first time in 19 weeks. This news is expected to put pressure on commodity and stock prices today.

This morning’s key report is the U.S. Weekly Initial Claims Report. This is the second of three job related reports this week. Last week’s report showed initial claims at 432K. Economists have pegged this week’s range at 420 to 470K with the consensus at 450K.

Equity markets are under pressure because of the news from China. Commodity related stocks are putting the most pressure on stock prices. In addition, institutional and mutual funds are expected to remain absent ahead of tomorrow’s U.S. Non-Farm Payrolls Report.

Treasury futures are trading lower but inside of their recent ranges. Trading is expected to ...

Wednesday, January 6, 2010

The reaction in the markets was muted this morning following the release of the U.S. ADP jobs data report. The report showed that employers cut 84,000 jobs in December. This was down from 145,000 jobs lost in November. The adjustment to the November figure was positive as it was originally estimated that 169,000 jobs were lost.

Although the stock indices rallied on the news, the move was muted as traders await this morning’s ISM Service report. Later in the day, the Fed’s Minutes will likely be a market mover. Traders seem reluctant to chase the stock indices higher at this time ahead of this morning’s regular session opening.

After trading lower overnight, March Treasury Bonds are mounting a strong comeback following the release of the ADP Report. Yesterday the main trend turned up on the daily chart. The chart pattern suggests that a rally back to 117’15 is possible if upside momentum can continue. Position evening and profit-taking following a long sell-off ahead of this Friday’s U.S. Non-Farm Payrolls report may be the force behind the building ...

Tuesday, January 5, 2010

Commodity and stock prices are expected to continue to see support from investors demanding higher yields although short-term overbought conditions may limit upside action. Traders are citing the stronger global economy and low interest rates in the U.S as two reasons for the renewed interest in higher yielding assets.

U.S. stock indices continued its surge to the upside overnight on the heels of higher equity markets in Asia and Europe.

Despite the stronger demand for higher yielding assets, U.S. Treasury Bonds and T-Notes are trading higher overnight. A support base is being built in the March Treasury Bonds which indicates that a value zone may have been reached. A trade through the last main top at 115’29 will turn the main trend to up and indicate further upside potential. A minor bottom has been reached in the March Treasury Notes which could launch a retracement to 116’24.

The weaker Dollar is helping to support February Gold. The main trend turned up on the daily chart, putting this market on path for a potential retracement to ...

Monday, January 4, 2010

A renewed surge in demand for yielding assets is helping to drive crude oil and gold prices overnight. A firm undertone is also developing in the equity markets while the Dollar is under pressure.

The strong rally in February Gold turned the main trend to up on the daily chart on the move through $1114.50. The daily chart indicates this market is poised to rally another $30 back to a retracement zone at $1151.30 to $1169.30.

The news of a better than expected surge in Chinese manufacturing is helping to trigger a breakout to the upside in March Crude Oil. Traders are expected to see increased demand for energy. In addition, cold weather in the U.S. has led to a pick-up in demand for heating oil and natural gas. The last main top at 81.52 was broken overnight, setting the stage for a test of the October top at 83.60.

A strong surge in U.K. and China manufacturing data helped to pressure the Dollar overnight. These two better than expected reports triggered renewed interest ...

Wednesday, December 30, 2009

The March Japanese Yen fell sharply overnight, taking out the late October bottom at 1.0847, on its way to a three-month low. Concern over a potential bankruptcy filing by Japan Airlines is putting pressure on the Yen. Stories are also circulating that Japan’s AA rating is in danger of being cut if the country does not shore up its debt situation. Finally, traders are also factoring in potential action by the Fed in 2010 that will lead to higher interest rates and a stronger Dollar.

A contraction in Euro Zone money supply is pressuring the March Euro. This news was unexpected but could cause issues in the short-run as it could lead to a credit crunch. This is important to note because of credit problems in Greece, Spain and Portugal. So far the European Central Bank has not offered any aid to these regions. Tightening credit conditions could mean that the ECB may not be in a position to offer relief to these troubled regions if problems accelerate.

The March British Pound is under pressure this morning ...

Tuesday, December 29, 2009

The U.S. Dollar fell overnight as traders took advantage of the thin, holiday trading by taking profits after the almost month-long rally. Demand for higher yielding assets also contributed to the weakness for the second day in a row buoyed by a rise in global equity markets. Finally, some of the selling pressure can be attributed to concerns over rising debt in the U.S.

Losses may be limited in the Dollar today due to the thin trading conditions and the release of a pair of positive economic reports. Investors expect today’s S&P/Case-Shiller October Index of Home Prices and Conference Board confidence report to reaffirm the turnaround in the economy.

The developing chart pattern suggests that the Dollar is vulnerable to a substantial correction before fresh buying resurfaces.

The March Euro is up overnight boosted by a report which showed rising prices in Germany. The European Central Bank expects inflation to rise over the near-term, but remain under its 2% annual target. A new main bottom has been formed at 1.4217. The chart pattern suggests that ...

December 28, 2009

Higher global equity markets are helping to boost demand for higher yielding assets, leading to a rise in U.S. stock index futures. The lack of any significant economic reports is giving traders a free ride to the upside. There is no strong resistance at this time.

Treasuries are trading lower once again. Demand for higher yielding assets and a weaker Dollar is helping to pressure March Treasury Bonds and March Treasury Notes. The T-Bonds are trading below a retracement level at 115’08. Regaining this area could trigger a short-covering rally.

The U.S. Dollar is down overnight, pressured by fresh demand for higher yielding assets. A boost in global equity markets is the main catalyst behind the fall in the Greenback. Technical factors are also contributing to the Dollar’s weakness. Overbought conditions are setting up the charts for a meaningful retracement of recent gains.

The March Euro is up overnight. A new main bottom has been formed at 1.4215. The chart pattern suggests that upside momentum may be building with a possibility for a rally back to 1.4681 ...

December 25, 2009

Economic Reports Help Sustain Firm Tone in U.S. Equity Markets

Traders looking for pre-holiday selling pressure in the equity markets on Thursday received a surprise when better than expected initial claims and durable goods reports helped underpin the markets while driving prices to their highest levels this week.

Treasuries continued to weaken. March Treasury Bonds and Treasury Notes sold off following the better than expected initial claims and durable goods reports. Signs of an economic recovery should continue to provide upside pressure on yields as traders price in the strong possibility the Fed will hike interest rates sooner than expected.

The U.S. Dollar finished lower against a basket of currencies under thin, pre-holiday trading conditions. Thursday’s weakness could have been worse had it not been for better than expected initial claims and durable goods. Both reports signaled an improving economy.

Although it is difficult to gauge the actual reasons behind the weakness, it’s easy to speculate that the huge run-up in the Dollar the past few weeks is making it ripe for profit-taking.

Thursday, December 24, 2009

Despite the higher equity markets overnight, the lack of upside momentum is making traders leery of a possible short-term profit-taking correction ahead of tomorrow’s holiday. Weakness in the Dollar could help to trigger a sell-off.

Treasuries are trading flat to better. March Treasury Bonds and March Treasury Notes are trying to recover after a hard sell-off this week. Selling pressure should resume after the holiday as traders are beginning to price in the possibility of an interest rate hike in 2010. Aggressive buying by Japanese investors helped to drive up yields earlier in the week.

The U.S. Dollar is trading lower overnight under thin, pre-holiday selling pressure. Although it is difficult to gauge the actual reasons behind the weakness, it’s easy to speculate that the huge run-up in the Dollar the past few weeks is making it ripe for profit-taking.

The most important thing that traders should take away from these markets at this time is that sentiment is shifting away from risk-based decision making to more fundamentally driven decision making. The rally earlier ...

Tuesday, December 22, 2009

U.S. stock indices are trading better overnight. Last night’s rally took out the recent top in the March E-mini S&P 500, reaching 1114.75. The next upside targets are 1119.00 to 1122.00. Optimism over a U.S. economic recovery is encouraging investors to seek higher yielding stocks at the expense of Treasuries and Gold.

March Treasury Bonds and Treasury Notes continue to feel downside pressure. Japanese investors are moving money into the Treasuries. Investors are asking for higher yields because of concerns over the abundance of U.S. debt and the Treasury’s ability to pay it back. Asset allocators are pulling money out of fixed income instruments while seeking higher yields in the stock market.

The March Euro is trading flat after Moody’s became the last of three major credit rating services to downgrade Greece’s debt. Traders had been waiting for this downgrade and were not surprised by the news. Although this last downgrade is out of the way, traders are not optimistic about the Euro. Many feel that further downgrades of other sovereign debt are likely. Spain and ...

Monday, December 21, 2009

The U.S. Dollar backed off a 3-month high overnight as volume began to dry up ahead of this week’s Christmas holiday. The relatively empty economic calendar along with holiday volume has the potential to create volatile trading conditions.

The March Euro is trading higher overnight. Traders will be monitoring Greece’s deficit problems as well as reassessing the possibility the Fed will begin tightening its monetary policy. Dubai debt issues may resurface today which could be a surprise for traders. Dubai is meeting with creditors to renegotiate credit terms. Look for the Euro to weaken if negotiations fall apart.

The March British Pound is trading weaker. The chart indicates the next potential downside target is 1.5980. Traders are repositioning ahead of tomorrow’s Final Third Quarter GDP report. Economists’ are guessing an upward revision to -0.1% from an earlier guess of -0.3%. This figure will be a positive for the British Pound and indicate that the U.K is getting ready to return to growth during the 4th quarter.

The Dollar is trading slightly better against ...

Friday, December 18, 2009

A geopolitical event is helping to give March Crude Oil a boost overnight. It’s been reported that Iranian troops entered an Iraqi oilfield. This news triggered a short-covering rally overnight while sending this market back above a key resistance price at 75.53. The first upside objective of this current rally is 77.85, followed by 78.09.

Global equity markets are rising overnight as traders increase demand for higher risk assets. The primary driver for this week’s weak trade in the equity markets has been aversion to risky assets due to credit concerns in the Euro Zone. The downgrade of Greece’s credit rating fueled yesterday’s sell-off, but the lack of new bearish developments overnight has triggered renewed demand for higher risk assets.

The key to today’s action will be how the March E-mini S&P 500 reacts following a test of 1101.75. If sellers step up at this price then look for the start of another test of 1090.00. Regaining this level could trigger further short-covering.

The rally in the March Treasury Bonds since the Fed announcement ...

Thursday, December 17, 2009

U.S. stock markets are expected to open lower based on weaker markets overnight. Traders are taking risky positions off the table in response to another debt rating downgrade of Greece. Traders now fear that the debt crisis could worsen in the Euro Zone and perhaps spread to U.S. banks. This news is triggering a rally in the Dollar and subsequent weakness in the U.S. equity markets. Today could be an ugly day in U.S. stock markets if enough traders decide to book profits before the end of the year rather than risk a substantial correction.

March Treasury Bonds are trading higher due to demand for a safe haven investment. Yesterday’s Fed statement signaled that rates were going to move higher. This pressured the Treasuries, particularly the long-end of the yield curve. The overnight downgrade of Greece debt and the sell-off in equity markets has sent traders to the safety of the Treasuries.

The stronger Dollar is pressuring February Gold. Yesterday gold rallied while the Dollar traded flat. This perhaps was a sign that investors were beginning to focus ...

Wednesday, December 16, 2009

Equities are holding firm overnight ahead of the Fed’s policy statement. Traders want to see indications that the Fed sees improvements in the economy. At the same time, they don’t want to see higher interest rates. This sets up the possibility of a choppy two-sided trade following the release of the FOMC statement. A rally through 1114.25 in the March E-mini S&P 500 is likely to trigger a rally to 1119.00, then 1122.00. A break under 1009.75 could trigger a hard break to 1096.75.

March Treasury Bonds are trading slightly better. The recent sell-off in the T-Bonds and T-Notes is a sign that traders are anticipating hawkish comments from the Fed. The failure of the Fed to accommodate these traders is likely to send the Treasuries sharply higher.

February Gold is trading higher. This is a sign that gold traders are betting on a weaker Dollar following the Fed report. The chart indicates a move to $1155.50 is likely.

March Crude oil is trading inside of a retracement zone after forming a new main bottom ...

Tuesday, December 15, 2009

The stronger Dollar triggered a sharp sell-off in February Gold overnight. Despite the hard break, this market is still holding a key 50% level at $1107.40. A break of this level will fuel a further decline to the November main bottom at $1102.60. Ultimately, this market should test uptrending Gann angle support at $1094.00. Watch for a technical bounce when this angle is tested.

Despite the stronger Dollar and weak equity prices, March Crude Oil is holding yesterday’s low at 72.45. At this time, the market is hugging a .618 price level at 73.63. Regaining this price will likely trigger a retracement to 75.53. Yesterday, OPEC did nothing to change the bearish supply/demand picture. Today’s industrial production report could help underpin this market today.

Equity markets are trading flat to lower across the board. Investors have digested the Dubai news and are now waiting for another catalyst to drive these indices higher. Many traders are choosing to remain flat ahead of tomorrow’s important Fed decision. Traders are reluctant to chase this market higher which means there ...

Monday, December 14, 2009

The U.S. Dollar is backing off a two-month high versus a trade-weighted basket of currencies on the news that Dubai received $10 billion in financing from Abu Dhabi to pay part of the debt held by state-owned Dubai World. This event is helping to alleviate one of the concerns which drove traders into the Dollar last week, the others being downgrades in Greece, Portugal and Spain. The overnight selling pressure is a sign that traders may be less risk averse and looking at taking on more risk today in the higher yielding currencies.

The main concern for investors this week is the Federal Reserve Open Market Committee meeting on December 16th. Since its last meeting in November, the U.S. unemployment rate has dropped to 10% and retail sales have risen above expectations. Job losses and the lack of consumer spending are two key determinants studied by the Fed. Traders are looking for the Fed to look at these two reports and perhaps issue a more hawkish statement. A dovish statement will be a surprise which is not likely to bode ...

Friday, December 11, 2009

Bullish reports out of China helped stock markets recover in Asia, leading to a strong rally in the December E-mini S&P 500. News that China’s November exports fell 1.2 percent following a 13.8 percent decline in October helped spike U.S. equity markets to the upside. The strong rally overnight helped take out yesterday’s high as well as a retracement level in the S&P contract at 1106.25. The key to a rally today will be whether investors are willing to chase this market higher.

Increased demand for risk will be the deciding factor as to whether the stock indices continue their strong surge. If retail sales come out better than expected, then look for higher prices. Volume has been low, but investors may return to the markets today with conviction if they get clarity from the Retail Sales Report.

March Treasury Bonds and Treasury Notes are feeling downside pressure following yesterday’s poor 30-year Bond auction. Investors are asking for higher yields because of concerns over the U.S. Treasury’s ability to pay its debt obligations.

February ...

Thursday, December 10, 2009

Stronger global equity markets are contributing to the weakness in the Dollar as traders are once again increasing demand for more risky assets after reassessing U.S. economic data and the odds of an interest rate increase by the Federal Reserve.

This morning, traders will get their first look at the U.S. employment situation following last week’s surprise drop in the unemployment rate. This report has a chance to set the tone for the day.

Stronger demand for equities is driving up the December E-mini S&P this morning. Traders seem to have shrugged aside debt concerns in Dubai, Greece and Spain while renewing their interest in higher yielding assets. Yesterday’s closing price reversal bottom at 1085.00 will be confirmed on a move through 1097.00. The chart pattern indicates that 1102.00 to 1106.00 are potential upside targets.

Renewed interest in higher yielding assets is helping to push March Treasury Bonds and Notes lower. Traders could ask for higher yields during today’s 30-year Bond auction. This would put additional pressure on these markets later in the ...

Wednesday, December 9, 2009

U.S. stock index futures are trading better overnight after the inability to follow-through to the downside following yesterday’s sell-off triggered a short-covering rally. The lack of fresh news regarding debt issues in Dubai and Greece is also encouraging traders to take on more risk. There is nothing in the news that could change the opinions of traders about the developing short-term weakness in the markets. This means that this current rally is likely only shortcovering rather than fresh buying. Look for the December E-mini S&P 500 to falter after a test of 1103.50.

March Treasury Bonds and Notes are trading lower. With debt concerns abating, traders in these two fixed income instruments are taking profits following a strong two-day rally. Today the Treasury will auction 10-Year Notes as part of this week’s $74 billion debt issue. The results of the auction will be released at the mid-session of trading.

The U.S. Dollar is trading weaker overnight after rallying to a 5-week high. The current rally from the bottom at 74.27 is stopping short of the November 20th top at ...

Tuesday, December 8, 2009

February Gold is down because of the strengthening Dollar but well above yesterday’s low. Investors are being “coached” by gold bug analysts to “buy the dips”, but this strategy could prove to be risky if the Dollar strengthens further. The recent vertical rise in this market suggests that an asset bubble may have been formed. Without new central bank buying pressure, the small trader will not have enough money to support another leg higher. This could lead to a further collapse in this market to at least $1107.00 over the short-run.

March Crude Oil remains under pressure because of lower equity prices, a stronger Dollar and low demand. A shift in trader mentality out of higher yielding assets could drop this market into the low 70’s over the near-term. Speculators drove this market higher and speculators leaving this market will drive it lower.

The December Canadian Dollar is trading lower ahead of this morning’s Bank of Canada announcement at 8:00am CT. The BoC is expected to leave interest rates at 0.25 percent. It should also reiterate its stance to ...

Monday, December 7, 2009

Last week, the U.S. Dollar posted a huge gain versus a basket of major currencies. The strong up move was triggered by a better than expected Non-Farm Payrolls Report which showed a decrease in the unemployment rate from 10.2% to 10%. The pace of job losses also declined and there was a revision to the better in October.

Traders bought the Dollar on the thought that the Fed would begin accelerating its process of reducing stimulus measures while gearing up to raise interest rates sooner than previously expected.

Technically, the move in the Dollar appears as a spike on the charts, but it did lay the foundation for a further rally this week by taking out the previous week’s high at 75.66. The weekly chart is the one to watch for the best change in trend indicator. At this time the main trend will turn up when this index crosses the November top at 77.50.

The short-term range is 77.50 to 74.27. The retracement zone of this range at 75.89 to 76.27 is near-term resistance. We’ve seen this ...

Friday, December 4, 2009

Equity Markets Flat Ahead of U.S. Employment Report

The U.S. Dollar and equity markets traded in a relatively tight range overnight ahead of this morning’s U.S. employment report. Traders are looking for an improvement today from the November report. Guesses are for a job loss of “only” 125,000 and for the unemployment rate to hold steady at 10.2 percent. There is some debate as to whether this is the low for the unemployment rate. At this time the consensus agrees the rate will stay the same this month, but is likely to rise to 10.5 percent by the end of the first quarter 2010.

Equity markets are expected to drop sharply if the jobs loss figure comes out well above the guess or if the unemployment rate rises. Yesterday there was evidence that the Dollar and the stock market were decoupling. In my opinion, a better than expected jobs number will trigger a rally in the Dollar but not necessarily the stock market.

Ask most economists if the unemployment rate is a lagging or leading indicator, and they ...

December 3, 2009

Asian Demand for Risk Drives Dollar Lower

Another surge to the upside in gold and renewed buying in Asian stock markets helped drive the Dollar lower overnight as investors once again increased demand for higher yielding assets.

The December Euro is trading higher overnight ahead of this morning’s European Central Bank report. Most traders have decided that the ECB will leave interest rates unchanged at 1% so the focus will be on ECB President Trichet’s talk at 7:30 a.m. Central Time. Trichet is expected to outline the ECB’s plan to wind down the billions of Euros of financial stimulus it has provided to the financial system.

The December British Pound surged to the upside, making a new high for the week, but has since fallen back inside of the key retracement zone at 1.6646 to 1.6575. Economic reports overnight are signaling that the U.K. is showing signs of improvement but that the road to recovery is likely to remain rough. A break back under 1.6575 is likely to lead to additional selling pressure.

The U.S. Dollar is ...

Wednesday, December 2, 2009

Traders will be focusing on the U.S. ADP Report this morning. The report is expected to show that the pace of jobs loss in the U.S. is slowing, bringing the economy closer to sustaining its current recovery. The early estimate is for a job loss of 150,000 versus a loss of 203,000 in October. A stronger than expected report will lead to an increase in risk appetite which should pressure the Dollar and help to rally stock indices. Later this afternoon, traders will react to the Fed’s Beige Book.

An increase in demand for higher risk assets should send the stock indices higher. Chart watchers should note that the December E-mini S&P 500 is still holding the November top at 1112.25. A break-out over this level should send the index soaring to a possible test of major 50% resistance at 1122.00. A break back under 1102.25 will be the first sign of weakness. A close under 1089.50 will be bearish.

The rise in higher yielding assets pressured the Treasury markets yesterday with the March Treasury Bonds taking the hardest ...

Tuesday, December 1, 2009

The U.S. Dollar continued to weaken overnight against most major currencies after China announced that its manufacturing sector rose to a seasonally adjusted 55.7 last month. This growth rate was the fastest pace in five years or since the index began being tracked.

Talks continued in Dubai to shore up its debt woes. Traders are continuing to chip away at last week’s losses in the foreign currency and equity markets as they grow more confident that this issue is a local problem rather than worldwide. Officials are defining the talks with creditors as “constructive”. As this situation improves, investors are stepping up demand for higher yielding currencies and assets.

The December Euro is up again overnight and in a position to challenge yesterday’s high at 1.5084. Upside momentum is building which can trigger a further rally to the high for the year at 1.5144. Later this week, the European Central Bank is set to meet. Traders expect interest rates to remain unchanged, but ECB members will make announcements regarding the gradual ending to government stimulus plans.

Monday, November 30, 2009

The U.S. Dollar is declining overnight as speculators are downplaying the debt problems in Dubai. Over the week-end, the United Arab Emirates central bank said it “stands behind” the country’s lenders. This helped to ease concerns that the state owned Dubai World will default on its debt. Traders now believe that this is a local economic problem rather than one with global ramifications. With these assurances in place, speculators are increasing their demand for higher yielding currencies.

Despite these assurances by the central bank, traders should continue to watch how the Dubai debt situation unfolds. The debt problem has exposed the fragility of the world financial markets. Although there may be a short-term pick-up in global demand for risk, upside momentum in foreign currencies may slow if investors decide to be a little more defensive in their speculative plays. Traders may decide to adopt a “trade not to lose” mentality which could create volatile trading conditions as investors will be quick to take profits following any appreciation.

Over the week-end, Chinese Premier Wen Jiabao rejected calls for a stronger ...

November 27, 2009

The U.S. Dollar is climbing sharply higher as global investors dump stocks and commodities on concerns about Dubai World’s debt problems. Fear is racing through the global investment community, making lower-yielding assets such as the Dollar and the Yen more attractive. The situation in Dubai began to break late Wednesday night and spilled over into Thursday while U.S. markets were closed for the Thanksgiving holiday.

Investors began to take money out of higher risk assets when the largest corporate entity in Dubai asked creditors for a six-month break on debt repayments of almost $60 billion. This action by the Dubai corporation is raising concerns that other emerging market entities may be overextended in debt which could lead to even more liquidation.

Financial markets are taking a hit all around the world as traders fear that banks are facing major exposure to Dubai World’s mounting debt issues.

After reaching a high of 1.5144 earlier this week, the December Euro is now in a position to turn the main trend down on the daily chart on a move through 1.4801. Technically, the ...

Wednesday, November 25, 2009

Equity and commodity markets are trading higher because of a weaker Dollar. The U.S. Dollar is down sharply across the board overnight as investors are reacting to yesterday’s U.S. Federal Reserve minutes and comments from the Reserve Bank of Australia.

The Forex markets are having a delayed reaction to the release of yesterday’s Fed minutes which showed the decline in the Dollar was not a major concern. The minutes basically stated the weakness in the Dollar is tolerable as long as it occurs in an orderly fashion.

Comments from the RBA’s Deputy Governor Battellino also drove up demand for risk appetite. In a statement to Australian housing conference attendees he said, “With the economy having only recently entered a new upswing, it is reasonable to assume that we will see this growth extended for a few more years yet”.

This week’s holiday shortened activity has no doubt left Forex traders starving for news so today’s reaction to these two news items may be a little exaggerated. The Fed’s minutes in my opinion offered nothing new. Bernanke basically ...

Tuesday, November 24, 2009

The Dollar is trading slightly better as traders await this morning’s U.S. 3rd Quarter GDP Report. The Forex markets are reversing yesterday’s gains. Risk aversion seems to be back
in

the market as higher yielding assets are feeling downside pressure. Thin volume in this holiday shortened weak is contributing to the weakness in foreign currencies along with liquidation ahead
of

the U.S. Thanksgiving holiday.

The December Euro is trading slightly better while the Dollar is strengthening versus all others. The Euro is up because German business confidence increased more than economists

forecast to a 15-month high in November.

This report suggests that the German economy may start to show some solid gains next year. Manufacturers are replenishing inventories and exports are expanding. This is good news

because many investors thought the Euro Zone exports would show a decline after the rise to $1.5000 in the Euro. All of this news points toward expansion during the fourth quarter.

Skeptics still ...

Monday, November 23, 2009

The December Euro is trading sharply higher overnight as speculators increase bets the U.S. economy will continue to weaken. Traders are basing their expectations in part on U.S.

economic reports this week which are expected to show a slower than expected recovery.

Today, existing home sales may show a slight increase in October, but tomorrow’s revised GDP could be cut below the 3.5% increase presented last month. Among other concerns for

investors are high unemployment and foreclosures. Recent reports have showed the U.S. economy is losing momentum which indicates a long, bumpy road to recovery.

Overnight, traders are reacting to news that the Fed will keep its stimulus measures intact and interest rates low beyond the announced March 2010 date. This is triggering the
rally

in the Euro as speculators believe that the European Central Bank is in a position to begin removing its stimulus from the market.

Yesterday, Federal Reserve Bank of St. Louis President James Bullard said that he supported ...

Friday, November 20, 2009

Lower global equity markets are helping to push the U.S. Dollar higher as investors shun risky assets for a second consecutive day. Traders began getting nervous earlier in the
week

after Fed Chairman Bernanke mentioned the level of the Dollar in a speech. This was followed by supportive comments from European Central Bank President Trichet who used a speaking opportunity to

announce his agreement with Bernanke and to try to talk up the Dollar.

The recent pace of the decline in the Dollar has been giving traders a clue that sentiment may be shifting. This shift started at about the same time that China was talking about

changing the value of the Yuan. While China remained hard-nosed about its currency this week when pressed by President Obama to change its ways, speculators were beginning to bet that China would

eventually cave in to international pressure and make a small adjustment in how it pegs its currency.

The combination of comments from Bernanke and Trichet along ...

Thursday, November 19, 2009

The U.S. Dollar is trading higher against most major currencies this morning with the exception of the Japanese Yen. Easing in equity, gold and crude oil prices is sending a signal
to

traders to lighten up positions and book profits after the recent decline in the Dollar. The inability to accelerate the Dollar to the downside is also contributing to the rally. Shorts seem to
have

pulled offers after the down side momentum started to flatten out.

The December Euro failed to take out $1.5000 which came as a surprise to traders. Yesterday’s rally in the Euro following comments from Luxembourg’s Juncker should have given the
Euro

the green light to challenge the high for the year at $1.5063, but when traders failed to print $1.5000 last night, the market turned seller.

The December British Pound is trading weaker. Overbought conditions are contributing to the weakness, but the major concern for traders today is the U.K. economy and the country’s

debt situation. Investors ...

Wednesday, November 18, 2009

Housing Starts Fall Unexpectedly; Treasuries Could Benefit

This morning it was reported that the Core CPI rose 0.3% while Housing Starts fell 10.6%. Treasury futures are trading a little lower after the news. A higher CPI number will be
an

indication of inflation which helps push interest rates higher. This will put pressure on the December Treasury Bonds and Treasury Notes. A sharp sell-off in the equity markets could trigger a
flight

to safety rally in the Treasuries. Both of these scenarios are possible today which means a two-side trade is likely. Watch for volatility. The surprise drop in the housing starts could support
the

Fed’s notion for interest rates to remain low for a prolonged period of time.

U.S. Equity futures are trading sideways to lower after an attempt to reach a new high for the week overnight failed. December E-mini S&P 500 futures made a high this week at

1112.00. A breakout above this level could trigger a sharp rally to ...

Tuesday, November 17, 2009

The U.S. Dollar is trading higher overnight based on oversold technical conditions. Yesterday’s comments from Fed Chairman Bernanke regarding the Dollar may also be triggering a

short-covering rally as well a position-lightening. The overnight action has not been sufficient enough to call for a change in trend.

Yesterday, Bernanke expressed concern for the Dollar, which was a surprise to some since the Fed Chairman rarely talks about the U.S. currency. In his speech, he said he remains

committed to a strong Dollar like the Treasurer usually says, but he failed to come up with a strategy to boost the greenback. In addition, he talked about interest rates remaining “exceptionally

low” for “an extended period”. It’s hard to believe that the long-term down trend will change for the Dollar given that interest rates are expected to remain low.

The short-term trend may reverse temporarily because traders usually get nervous whenever a central bank official talks about their currency. This usually leads to counter-trend

trading as investors reel ...

Monday, November 16, 2009

The weaker Dollar is helping to drive December Gold higher overnight. Since gold is priced in Dollars, the decline in the Dollar is making it more appealing to foreign investors.
Keep

in mind that the higher this market goes, the wider the ranges. Watch for volatility to continue to expand.

Equity traders will be watching retail stocks today following the U.S. Retail Sales Report. The driving force in this market is still the weaker Dollar. As long as global interest

rates remain historically low, look for U.S. equity markets to continue to rise. Economic and earnings reports could help to produce volatile swings in the markets but should not be enough to
change

the trend to down at this time.

Interest rate futures could see pressure today as Treasury Bonds and Treasury Notes continue to compete with the higher yields being offered by the equity markets. A worse than

expected U.S. Retail Report will send a sign that the economy is still under pressure. ...