Fed Beige Book Triggers Late Session Equity Market Break
stock indices finished lower with the exception of the March E-mini S&P
after failing to hold on to earlier gains. The break late in the session
coincided with the release of Fedâ€™s Beige book. At first trader reaction to the
report was non-committal as it offered no new bullish economic news. After a
delayed response, a sell-off began as if traders were saying â€śno bullish news
is bad newsâ€ť.
Earlier in the session, U.S. equity markets surged to the
upside following the release of a better than expected ADP jobs report and a
much improved ISM Services Index. The ADP figure came out at the low end of the
range which gave investors a reason to believe that Fridayâ€™s Non-Farm Payroll
figure may also show an improvement in the U.S. jobs situation.
The reversal to the downside in the NASDAQ and Dow could
have been triggered by overbought conditions or position evening ahead of
Fridayâ€™s Non-Farm Payrolls Report. The current chart set up makes the market
vulnerable for a correction to the downside, but not necessary a change in
Treasury markets weakened after U.S. jobs data showed improvement
from the previous month and the ISM Services Index rose more than expected.
Traders saw this as a sign that the U.S. economy is improving which
could mean the Fed hikes rates sooner than expected. Investors also may have pared
positions ahead of Fridayâ€™s Non-Farm Payrolls Report. Technically, the charts
indicate a move to 116â€™04 is likely over the near-term.
April Gold rallied through and held a key 50% level at
$1136.75. The current chart formation suggests that holding this level could
trigger a further rally to the .618 retracement price at $1158.50. The
direction of the Dollar will dictate the next move in Gold. May Silver turned
the main trend higher on the trade through $16.96. Regaining the technical
level at $17.09 was a sign of strength with $17.66 the next upside target.
Technically, the crude oil charts indicates plenty of room
to the upside. Fundamentally, the weaker Dollar is helping to boost demand for
commodities, but the increase in weekly crude oil inventories may be limiting
the upside momentum.
On Wednesday, the U.S. Dollar lost ground to every major
currency except the New Zealand Dollar. Early selling pressure triggered a
change in trend when this index took out the last main top at 80.14. In the
process a new lower top was formed at 81.34. The charts are indicating a break
to 77.86 is possible over the near-term.
The March Euro rose on Wednesday to its highest level since
February 17th after traders covered short positions and aggressive investors
went long following the announcement that Greece managed to make additional
budget cuts while increasing taxes in an attempt to shore up its dismal budget
and gain favors from the European Union.
new fiscal responsibility plan drew positive comments from Luxembourgâ€™s Jean-Claude Juncker who said â€śGreeceâ€™s
ambitious program to correct its fiscal imbalances is now credibly on track.â€ť
Technically, the Euro turned the main trend to up on the
daily chart for the first time since December 7th when the currency crossed the
last main top at 1.3692. The action by Greece and the possibility of new
government regulation of hedge funds could trigger a massive short-covering
rally over the short-run to 1.4009. This is possible if a sizeable amount of
the 50,000+ open shorts decide to cover their positions at the same time.
Often, news driven downtrends end with the majority of the traders running for
cover through one exit.
The strengthening Euro triggered some light short-covering
in the March British Pound. This current move is not expected to lead to a
change in trend however. The British Pound remains the weakest currency because
of the U.K.â€™s
wide budget deficit, soft monetary policy and political uncertainty.Traders pared short positions on the belief
that Greece would finally
receive some bailout money from Germany
The March Japanese Yen closed higher after taking out the
last main top at 1.1295. A follow-through to the upside will trigger a test of
the.618 retracement level at 1.1356. This market was strong despite increasing
demand for risky assets. Iâ€™m still confused about the move in the Japanese Yen.
What I think is happening is the Yen isnâ€™t getting stronger, the Dollar is
The March Swiss Franc closed higher as traders bought the
currency on the idea that a rally in the Euro would diminish the need for the
Swiss National Bank to flood the market with cash in an effort to protect its
export sector. Upside momentum could take this market to .9526 over the
The March Canadian Dollar continued its uptrend on
Wednesday, encouraged by speculation that the Bank of Canada may raise interest
rates sometime after June. Trader sentiment shifted to the long side of this contract
after the Canadian government released a better than expected Fourth Quarter
GDP Report earlier in the week. Upside momentum is building which puts this
market in a position to test the January top at .9780.
The market is also rapidly approaching an area which
previously raised concerns at the Bank of Canada. The BoC was concerned that
the rapid appreciation in the Canadian Dollar would have a detrimental effect
on Canadian exports. Since the current move has been justified because of the
robust economic growth, it will be interesting to see if the BoC attempts
another verbal intervention or lets the currency seek its own level.
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