Friday July 24, 2009 - 12:27:10 GMT
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Daily Futures Analysis
Yesterdayâ€™s soaring equity markets kept pressure on the September Treasury Bonds all day as investors dumped low-yielding Treasuries for higher-risk, higher-reward stocks.
Earnings took a backseat on Thursday as traders focused on the better than expected home sales report. This particular report carried more weight than usual as many investors still believe the best sign the economy was recovering will be a strong housing market.
Stock index futures surged to new highs for the year on Thursday buoyed by good earnings and a better than expected housing number. The buying came in early in the session and at one time it appeared that the housing number had been leaked to traders as the markets rallied sharply higher just prior to the release of this friendly report.
After the initial thrust to the upside, gains were able to be maintained throughout the trading session not because of all-day buying but mainly because no one was willing to short at high levels or risk getting run over by a freight train.
Traders will be watching today to see if the equity markets can follow-through to the upside following yesterdayâ€™s big performance. After the close three key companies reported earnings below expectations which may lead to a profit-taking break today.
The U.S. Dollar is trading lower versus the Euro, Canadian Dollar and Swiss Franc which suggests a higher opening in the equity markets. The U.S. Dollar is also lower versus the Yen which could be profit-taking after yesterdayâ€™s rally. Lately a weaker Yen has been suggesting a bullish stock market
Resistance at 1.4337 has been keeping a lid on the Euro since June 1. The rally in the Canadian Dollar is being triggered by the surge in equities and the strong recovery in crude oil. The Bank of Canada likes the recovery in the economy but is becoming a little concerned about the rapid rise in the currency. Their fear is a higher priced Canadian Dollar will slow down export demand and curtail the recovery in the economy.
August Gold is trading lower overnight which is a little confusing because the Dollar is weaker. Since this market is currently at a major retracement level, this could be a sign that a top is being formed. Despite the weaker Dollar, it is possible that gold has run out of buyers at current levels.
Today looks as if it trading will be volatile and two-sided. The focus will be on the stock indices particularly the September NASDAQ. This market has been guiding equities higher for 12 straight days. A failure in this market to follow-through to the upside will be the first sign of weakness.
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