U.S. stock indices
reversed earlier weakness on the heels of a better than expected
Chicago Purchasing Managers Index. Stocks were trading lower overnight
and after the opening because of end-of-the-year profit-taking.
March E-mini S&P 500 formed a closing price reversal top at 1128.50
yesterday. This pattern suggested a break to 1108.50 to 1103.75 was
imminent. Last nightâ€™s follow-through to the downside confirmed the
short-term top. This morningâ€™s short-covering rally could find
resistance at 1120.75 to 1122.50.
March Treasury Bonds are
trading higher. End-of-the-year position evening is the catalyst behind
the slight rise the last two days. Technically, holding above 115â€™08 is
friendly and could trigger a short-covering retracement to 117â€™01 over
the short-run. Longer-term, the threat of rising interest rates,
oversupply of debt and a strong stock market should help to maintain
downside pressure on the Treasuries.
The stronger Dollar is
pressuring February Gold this morning. A new minor range has formed at
$1075.20 to $1114.50. The retracement zone of this range is $1094.80 to
$1090.20. Currently, the market is testing this zone. If it holds, then
gold may attempt to rally through the last main top at $1114.50.
Crossing this level will turn the main trend to up and trigger a rally
to $1151.00. A failure to hold this zone will fuel a break to $1075.20.
Crude Oil is trading a little better this morning. Bullish traders are
trying to push this market higher in anticipation of greater demand
because of the improving economy. Traders are waiting, however, this
morning for the oil inventory report which is expected to show a
drawdown. A bearish report coupled with the stronger Dollar could send
March Crude Oil sharply lower to 76.82.
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 Japanâ€™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 following yesterdayâ€™s reversal to the
downside. Momentum is building which could keep pressure on this
currency all day. Traders seem content with driving this market to the
mid-October bottom at 1.5702. Investors are worried that the economy
will remain weak over the near-term while the U.K. wrestles with a huge
The March Swiss Franc confirmed yesterdayâ€™s closing
price reversal top at .9734 when it took out .9633. The chart pattern
suggests the next downside objective is .9628 to .9623. Traders are
reacting to potential higher interest rates in the U.S. and the
Weakening equity markets and lower gold is
helping to pressure the March Canadian Dollar. Yesterday this currency
pair formed a closing price reversal top which was confirmed overnight.
The current chart pattern suggests a break to .9476 to .9435 is likely
over the short-run.