U.S. Equity Markets Pare Losses as Investors Remain Calm
equity markets pared huge overnight losses after traders gobbled up stocks
shortly after a gap lower opening. Investors jumped on the opportunity to buy
cheaper stocks following the dramatic sell-off in global equity markets over
the Thanksgiving holiday.
Equity markets were driven lower in Asia and Europe after
debt problems were reported in Dubai.This large corporation known as Dubai World allegedly
asked for a $59 billion debt repayment postponement until May 2010.The announcement sent shockwaves through
commodity and equity markets as investors liquidated risky positions and sought
safety in the U.S. Dollar.
Investors traded the markets in an orderly fashion, however,
once the U.S.
stock markets opened.Traders bought up
lower priced stocks from the opening with the December E-mini S&P 500
rising from 1077.75 to 1098.25.The
break from the recent high at 1112.25 only amounted to a retracement of the
1026.00 to 1112.25 range.This retracement
zone is 1069.00 to 1059.00.The low the
past two days was 1067.00.
Itâ€™s hard to tell at this time if todayâ€™s rally was
short-covering or fresh buying.If the
markets are indeed topping, then Fridayâ€™s rally may have taken place to set up
a secondary lower top. A failure to make a new high on this current rally could
be a strong sign that the top is in for the year.
December Treasury Bonds pared gains after a strong surge to
the upside.Friday morningâ€™s rally was
triggered by a flight to safety rally into U.S. Treasury markets.Look for the direction of the stock market to
dictate the movement and direction of the U.S. debt markets next week.
The U.S. Dollar gave back over 50% of its early morning
gains as investors took profits after a strong two-day rise.The inability to break equity markets lower
after the opening helped drive up demand for higher risk assets.Investors began selling the Dollar after it
became clear that there would be no panic selling of higher risk assets.
Overnight the Dollar climbed sharply higher as global
investors dumped stocks and commodities on concerns that Dubai Worldâ€™s debt
problems would escalate into a worldwide credit crisis similar to the one the U.S.
faced when Lehman Brothers collapsed in 2008. Fear raced 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 liquidate higher risk assets when the
largest corporate entity in Dubai
asked creditors for a six-month postponement of $59 billion in debt
payments.This action by the Dubai entity raised
concerns that other emerging market entities may be overextended in debt which
could lead to even more liquidation.
Global financial markets took a huge hit as traders feared
that banks were facing major exposure to Dubai Worldâ€™s mounting debt issues.
equity markets opened and were able to hold their lows, profit-takers hit the
Dollar and the foreign currency markets posted a strong recovery from their
February Gold bounced back after a sharp sell-off on Friday.
The stronger Dollar triggered a break in the precious metals complex but the
inability of the Dollar to follow-through to the upside helped gold mount a
strong comeback.The down move in gold
was accelerated when global traders began dumping dollar-based assets.The late session rally in gold helped it
avoid a week closing price reversal top.A follow-through to the downside next week will be a sign that a
short-term top is being formed.
March Crude Oil traded sharply lower early in the trading
session. Lower equity prices and a higher Dollar helped provide the downside
pressure.Based on the main range of
67.46 to 83.60, a retracement zone was been formed at 75.53 to 73.43.Fridayâ€™s low stopped slightly below the 50%
price at 74.88.The current rally from
this bottom could falter inside 79.24 to 80.27.Crude Oil could feel more downside pressure next week, if the Dubai credit problem
blows up into something major.
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Mon 18 Dec
10:00 EZ- final HICP Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes Mon 25 Dec
00:00 Christmas Holidays
Potential Trading Opportunities
POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.
POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
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