U.S. equity markets are
trading sharply lower at the mid-session. Today’s break was initiated
by a weaker than expected U.S. GDP report. Although the report showed
that the economy expanded by 3.2%, economists were looking for an
expansion of 3.3%.
Later, in the morning, a weaker than
expected consumer sentiment report helped to accelerate the break. Some
traders feel that although the EU and Greece are expected to have a
bailout deal worked out by the end of the week-end, there is just too
much risk in holding risky assets like stocks over the week-end.
Additional pressure is coming on chatter regarding a possible criminal
investigation of Goldman Sachs.
The main trend in the June E-mini
S&P 500 is down. Today’s failure to hold the 50% level at 1196.75
is an indication of weakness. It is possible that a secondary higher
top has been formed. A close under 1212.25 will form a weekly closing
price reversal top which could set up the start of a 2 to 3 week break.
Weaker
equity markets are helping to drive June Treasury Bonds higher in a
flight to safety rally. This week’s better than expected Treasury
auction is also contributing to the strength. The weekly chart
indicates that a clean upside breakout is taking place. The next upside
objective is 119’16.
The weaker Dollar is triggering a breakout
to the upside in June Gold. Lower demand for equities is also helping
to boost gold along with lingering fear that Euro Zone problems are
going to continue to put pressure on the Euro. Some gold traders still
feel that Euro will be broken up if fiscal problems escalate in Spain,
Portugal and Ireland.
The weaker Dollar and stronger Euro is
helping to buoy June Crude Oil. This market bottomed earlier in the
week at 81.29 just as it was becoming apparent to investors that a
bailout deal between Greece and the EU may be reached by this week-end.
Bullish traders feel that a stable Euro will lead to increased demand
for energy products.
At the mid-session, the June Euro is up
but well off its high. Although the EU feels that a bailout agreement
with Greece will be reached this week-end. Some traders feel that there
is too much risk to hold a long position until Monday. Most traders
feel that more downside risk exists in the Euro because of lingering
problems in the Euro Zone with Spain, Portugal and Ireland.
After
an initial surge to the upside overnight, the June British Pound is
trading lower. Traders were buying in response to the strong showing at
the debate by the Conservative Party. Some traders feel that the
emergence of a leader less than a week before the May 6th election will
reduce the possibility of a hung parliament.
The British Pound
began to weaken following the release of the U.S. GDP report. Although
this report showed the economy had expanded by 3.2%, it fell short of
the expected retracement of 3.3%.
A drop in demand for higher
risk assets as well as yesterday’s negative commentary from the Bank of
Canada’s Mark Carney is putting pressure on the June Canadian Dollar.
On Thursday, Carney made a statement regarding a strong currency and
its impact on inflation and monetary. This comment amounted to a
“verbal intervention” which is the main catalyst behind today’s
weakness.
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