U.S. equity markets are
plunging this morning following a drop in the Euro under 1.25. The move
in the Euro began as a report that Franceâ€™s president had threatened to
pull his nation out of the Euro Zone. French President Nicolas
Sarkozyâ€™s comments reignited the fear of a collapse in the currency.
Traders are divesting out of higher risk assets pressuring U.S. stocks.
The drop in the Euro spread fear to the global equity markets
which began to weaken overnight. This set up the U.S. equity markets
for a break following Thursdayâ€™s closing price reversal top.
the June E-mini S&P 500 is set up to retrace at least 50% of the
week-long rally. The move from 1056.00 to 1174.75 creates a retracement
target at 1115.50 to 1101.50.
Pressure is on the June E-mini
NASDAQ this morning. Thursdayâ€™s closing price reversal top sets up a
potential break to 1856.00 to 1126.25.
The bearish closing price reversal top on the daily E-mini June Dow charts sets up a potential retracement to 10376 to 10251.
Treasury Bonds are soaring this morning in a flight to safety rally.
Based on the short-term range of 124â€™16 to 119â€™26, traders should look
for a minimum retracement into 122â€™05 to 122â€™23. With equity prices
plunging and fear spreading across Europe, traders want the protection
the Treasury markets offer.
The falling Euro and the strong
Dollar has not been able to trigger a breakout rally in June Gold. This
comes as a surprise, but it could be related to margin calls in the
equity markets. For weeks, gold has become the safe haven currency.
During the Greece financial crisis, money was flooding into gold,
driving it to an all-time high. At this time, Gold is barely holding
onto its gains which could be a reflection of margin calls hitting
stock traders. Traders often begin liquidating speculative positions to
meet margin calls in investments. This may be the case in gold this
June Crude Oil is collapsing this morning on the Euro
break. Bearish traders are becoming more confident that the problems in
the Euro Zone are going to slow down demand for crude oil. Downside
momentum suggests that 70.75 is the next target over the near-term.
Earlier in the week, a report from the Energy Information
Administration started the break with a report showing that inventories
had risen more than expected.
The key to todayâ€™s markets will be
the direction of the Euro. The comments from the France President may
have started the break, but the situation had been fragile for a while.
As of last nightâ€™s close, the Euro had effectively wiped out all of the
$1 trillion financial aid offered by the European Union earlier in the
week. Investors are losing confidence in the Euro and appear to be
divesting out of all Euro-denominated investments.
is expected to continue throughout the day. There are stories
circulating that the comments from the French President has been
denied. This has not been confirmed, but if the stories are true, there
may be a quick short-covering rally.
The main focus, however,
will remain on the short-side of the Euro. The market is still being
pushed lower by the hedge funds and large traders. They are unlikely to
lighten up on the stranglehold they have on the market as the bearish
story continues to unfold.