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.
short-term trend is up in the March Treasury Bonds, but the market
appears to be stalling inside of a retracement zone at 116â€™28 to
117â€™14. Last nightâ€™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 instruments. As the government begins to pull stimulus measures
which have artificially kept interest rates low, investors are going to
have to begin pricing in a true interest rate. Heavy Treasury debt and
new corporate debt could trigger a spike in interest rates because of
The strength in the Dollar is helping to pressure
February Gold today, although this market has traded sideways for the
past four days. A shift in momentum to the downside could trigger a
break to $1119.10 to $1106.80 over the near-term. News if higher
interest rates in China and a possible end to stimulus plans could mean
less demand for raw materials. This is also putting pressure on
precious and industrial metals.
March Crude Oil is also under
pressure because of the strengthening Dollar and a potential drop in
demand from China. Speculators have taken the weather premium out of
the crude market which means a further decline is possible as the
market is likely to return to the pre-cold weather price area.
Currently, March Crude Oil is trying to establish support inside of a
retracement zone at 78.99 to 77.70. Regaining the top end of this zone
could trigger a short-covering rally to 80.95. A failure to hold the
lower end of the zone indicates acceleration to the downside is likely.
drop in global equity markets is helping to boost the Dollar as traders
shift out of higher yielding assets. The Dollar started out weaker
overnight as traders returned after a U.S. holiday, but it turned
higher on technical factors and surprise economic data from competing
nations. Shortly before the opening, the Dollar is trading higher
versus most major markets except the British Pound. This could shift as
overnight downside pressure on the Pound seems to be building.
March Euro continues to take a pounding as European finance ministers
prepare to discuss Greeceâ€™s debt problems. Fears of a potential Greece
default and additional credit market woes in Spain, Portugal and
perhaps Ireland are weighing on the Euro.
Traders expect the
European finance ministers to hold their ground and maintain that
Greece solves its own problems. This could be an indication that this
problem will persist as Greece is having problems reaching a budget
News that German investor confidence declined more
than expected is helping to draw additional selling pressure.
Speculators are beginning to price in the possibility the Euro Zone
economy may be stalling. This report could be proof that the Euro Zone
recovery is falling behind the other major economies.
the March Euro is finding resistance at downtrending Gann angle
resistance at 1.4404. Overnight, the market failed to hold a
retracement zone at 1.4386 to 1.4346, which indicates further weakness
is likely. This area is likely to act as a pivot zone over the
The March British Pound originally soared to the
upside on the news that Kraft was about to acquire Cadbury PLC. The
news of the acquisition originally drew bids from British Pound traders
who helped maintain its early upside bias. The violation of key
technical resistance levels also helped to send the market higher. This
was most likely a follow-through rally following yesterdayâ€™s improving
U.K. housing report.
Overnight, the British Pound pierced a 50%
resistance level at 1.6355, but fell short of a test of the .618 level
at 1.6478. Additional resistance was provided by downtrending Gann
angle resistance at 1.6438.
Higher than expected consumer
inflation helped drive the British Pound lower after an initial spike
following the release of the report. Todayâ€™s report showed that
inflation had accelerated at a record pace. It also was proof that the
Bank of England stimulus plan is working, and that there is no need for
further stimulus measures. The BoE stimulus activity did its job but
stopping the threat of inflation, but has helped put inflation back on
Technically, the overnight action in the British
Pound has put this market in a position to post a daily closing price
reversal top. All that is needed is a lower close, and the March
British Pound will be set up for a substantial break to the downside.
Preliminary chart work suggests there is room to correct to 1.6176 over