Asset Allocators Shift Money to Stocks While Shunning Treasuries
Real buying returned to the stock market today as investors
shifted money from fixed-income Treasuries to higher yielding equities.This is all part of a reallocation of
assets.Investors are betting on a U.S. economic
recovery to drive stock prices higher in 2010.On the other hand, investors are betting that the value of Treasury
Bonds and Notes will continue to erode as interest rates rise.
Todayâ€™s rally in the U.S. Dollar appears to be a sign that
risk sentiment may not be the driving force behind price action much
longer.The action today suggests that
funds are being reallocated into the Dollar and stocks in an effort to capture
a rise from the continuing improvement in the U.S. economy. The positive trade in
both the stock and Dollar markets is a sign that investors are shifting back to
watching traditional fundamentals for direction.
The March Euro finished the day lower.The improving U.S.
economy and lingering debt issues in Greece,
Portugal and Spain
are likely to continue to pressure the Euro.Longer-term charts indicate a move to 1.3800 is likely.
The March British Pound closed down for the day.The chart indicates the next potential
downside target is 1.5980.Traders are
repositioning ahead of Tuesdayâ€™s Final Third Quarter GDP report.Economistsâ€™ are guessing an upward revision
to -0.1% from an earlier guess of -0.3%.This figure will be a positive for the GBP USD and indicate that the U.K
is getting ready to return to growth during the 4th quarter.
The March Japanese yen fell sharply on Monday and is now
building downside momentum for a test of the October bottom at 1.0847. The only
factor that could stop another leg lower tomorrow will be thin trading
conditions because of the holiday trade. Declining demand for lower yielding
assets is helping to boost the Dollar.Carry-trade action is also putting pressure on the currency as investors
sell Japanese Yen to buy stocks.
For a while this morning, it looked as if oversold
conditions would trigger a short-covering rally in the March Swiss Franc back
to the old bottom at .9675. This currency turned around, however, shortly after
the New York
opening as precious metals broke in an asset allocation play.Traders should pay close attention to the
gold market.Weaker gold prices will
weaken the Swiss Franc.
The March Canadian Dollar closed higher as strong equity
markets signaled the possibility of an economic recovery.Traders feel that a recovery in the U.S.
markets will lead to an even stronger rally in the Canadian economy since this
economy does not have to grow much to show strength.Lower gold and crude prices could limit gains
in the Canadian Dollar. At this time, this pair is ping-ponging between a pair
of 50% prices at .9505 and .9446.
Reallocation of resources out of gold and into the Dollar
and stocks pressured February Gold today.Todayâ€™s action appears to indicate that speculative money is being taken
out of the gold market and redeployed into equities.
An easing of tensions in between Iraq
helped trigger weakness in March Crude Oil today.The stronger Dollar also had a bearish
influence as buying dried up in higher risk commodities.Traders could be looking at the bearish
fundamentals and not liking what they see.
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