Tuesday May 4, 2010 - 19:00:25 GMT
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Forex Hound - www.forexhound.com
Multiple Factors Driving U.S. Equity Markets Lower
U.S. stock indices are
trading sharply lower at the mid-session. Traders are reducing risks
because of a multitude of factors including Euro Zone debt issues,
financial market regulation, the threat of international terrorism and
possible criminal action against Goldman Sachs.
Today‚Äôs action in
the June E-mini S&P 500 reaffirmed the main down trend while also
confirming the weekly closing price reversal top. This pattern usually
suggests the start of a 2 to 3 week correction. Downside momentum could
take this market back to 1134.00 over the near-term.
Treasury Bonds are soaring in a flight to safety rally. Money is
leaving the stock market and traders are dumping higher risk assets
such as gold and crude oil. This is encouraging traders to seek safety
in the lower risk, lower yielding T-Bond.
June Gold is now
trading lower after an initial surge to the upside. At first
speculators were buying gold as they hedged against a possible collapse
in the Euro. Traders took profits as the market neared $1200 and the
U.S. Dollar soared.
A drop in demand for higher risk assets and
the possibility that a slowdown in the Euro Zone will lead to lower
demand for energy is helping to drive the June Crude Oil lower.
drop in gold, crude and equities is helping to trigger a break down in
the June Canadian Dollar. After building a distributive top in April,
this contract finally crossed a swing bottom at .9789 to turn the main
trend to down on the daily chart. Downside momentum indicates that
.9705 is the next downside objective followed by .9649. The weakening
Canadian Dollar is most likely pleasing to the Bank of Canada which
hinted last week that a strong currency is likely to have an impact on
inflation and monetary policy. This led this analyst to believe that
the BoC was intervening to weaken the Loonie.
The June Euro is
trading sharply lower at the mid-session after reaching a new 12-month
low. Although a bailout agreement was reached by the Greek government,
the European Central Bank and the International Monetary Fund, bearish
traders have shifted their focus to the growing fiscal problems in
Spain and Portugal.
Problems in the Euro Zone are spreading to
the U.K. June British Pound traders are also concerned about the May
6th election. The main worry is that the current polls suggest the
strong possibility of a hung parliament. If this occurs, then it may
mean that the new parliament may not be able to come up with concrete
plans to fight the budget deficit and sovereign debt concerns.
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