Stocks being pressured by Profit-taking; Greek Fears
equity markets are called lower this morning after being drilled by a hard
sell-off on Wednesday. Some say that comments from Kansas City Fed President
Hoenig triggered the break when he talked about a potential asset bubble
forming and the need for higher interest rate. This gave worried traders an
excuse to take profits after stocks reached lofty levels earlier in the week.
The inability of the Dow to test 11,000 sent a psychological message to the
market that maybe equities are over-priced.
June Treasury Bonds and Treasury Notes are under a little
pressure this morning following Wednesdayâ€™s short-covering rally. Yesterdayâ€™s
upside move was triggered by better than expected 10-Year auction demand.
Yields fell as traders looked for safety due to escalating default problems in Greece.
Treasury markets may weaken as traders do not expect to see similar demand for
30-Year bonds during todayâ€™s auction.
Overbought conditions and a stronger Dollar have June Gold
in a holding pattern this morning. This market is trading lower, but not
falling apart. Speculators are being encouraged to buy gold on the premise that
may default on its debt. This is triggering a flight into hard assets. There is
no threat of inflation at this time. Traders are buying gold because of the
lack of confidence in paper assets.
June Crude Oil is under pressure because of the stronger
Dollar and weaker Euro. In addition, lower gold and equity prices are
pressuring demand for higher risk assets. Wednesdayâ€™s U.S. supply and
demand report was bearish, which means that the bulk of the recent rally can be
attributed to speculative buying. The chart indicates that a break to 83.43 is
possible over the near-term.
The U.S. Dollar is trading better against the Euro and
British Pound as Forex traders await todayâ€™s European Central Bank and Bank of
England Policy statements. The Dollar is also gaining against the
commodity-linked currencies, helped by lower gold and crude oil. Weaker equity
markets are putting additional pressure on higher risk currencies while
underpinning the lower yielding Japanese Yen.
U.S. Treasury Secretary Geithner is in Beijing this morning to discuss the Chinese
currency and other economic issues. The visit by Geithner is a good sign that China
is open to the idea of letting its currency rise against the Dollar.
The June Euro is trading lower overnight. Pressure continues
to mount on this currency because of growing concerns that Greece will default on its debt.
The spread between Greek Bonds and German Bunds is widening, making it
difficult for Greece
to finance its debt.
News that German Industrial Production was unexpectedly flat
in February is also helping to pressure this currency. A surprise drop in Euro
Zone Retail Sales has solidified the thought that the European Central Bank
will leave interest rates unchanged this morning. Based on the worsening Greek
situation and the poor economy, some traders now believe the ECB will leave
interest rates at historically low levels until early 2011. Investors will be
watching ECB President Trichetâ€™s comments this morning to see if he has
anything new to say about Greece.
Some traders expect him to reassure investors that the situation is under
control and that nothing unexpected is developing.
Technically, this market is getting dangerously close to the
recent main bottom at 1.3267. If todayâ€™s ECB policy statement takes on a more
dovish tone than expected, then look for selling pressure to drive this market
to a new low for the year.
Traders were pleasantly surprised overnight on the news that
U.K. Industrial Production was higher than expected. The report showed an
increase of 1% versus a pre-report estimate of 0.5%. The June British Pound
rallied on the news, but not enough to change the trend to up. Technically,
this market will remain in a downtrend until the last swing top at 1.5381 is
violated. This market is also having trouble piercing a 50% retracement level
at 1.5297. Additional resistance comes in at a downtrending Gann angle at
This morning, the Bank of England is expected to leave
interest rates unchanged at historically low levels. Despite some improvements
in the economy since the last meeting in March, donâ€™t be surprised if the BoE
announces an expansion or an extension of its current quantitative easing
program to give the economy an additional boost. The policy statement by the
BoE may also address the widening budget deficit and its threat to the economic
Overnight, the June Swiss Franc turned the main trend to down
on the daily chart after breaking the last main swing bottom at .9307. In
addition, this currency pair crossed to the bear side of an uptrending Gann
angle and a major retracement zone at .9355 to .9315. The weaker Euro is
increasing the possibility of an intervention by the Swiss National Bank.
The weaker U.S.
equity markets are helping to encourage Japanese investors to seek protection
against a substantial sell-off. This repatriation of funds is supporting the
June Japanese Yen.
Technically, this market is strengthening because of the
closing price reversal pattern from earlier in the week. Based on the
short-term range of 1.1148 to 1.0558, the current upside momentum and chart
formation indicates a test of 1.0853 is likely over the near-term.
Fundamentally, weaker gold and crude oil is helping to pressure
the June Canadian Dollar. Technically, Wednesdayâ€™s closing price reversal top
was confirmed overnight. This pattern suggests a minimum 2 to 3 day break or a
50% retracement to .9864.
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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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