U.S. equity markets are
trading sharply lower at the mid-session as large investors have been
dumping positions due to the lack of clarity from financial market
regulators in Europe and the U.S.
Technically, all three major
stock markets seem to be getting drawn to the spike bottoms put in
during the first week in May. The low target price in the June E-mini
S&P 500 is 1056.00. The June E-mini NASDAQâ€™s target is 1730.25 and
the June E-mini Dow has a downside objective of 9840.
of clarity regarding proposed regulatory legislation and the surprise
curbing of short sales by Germany is making investors nervous.
Throughout the entire Greek debt crisis, investors have been looking
for clarity and conviction from the European Union. Each time the EU
has made a proposal, they have failed to explain to investors the logic
behind the move. This weekâ€™s move by Germany to forbid the shorting of
bank stocks is a good example of what is triggering the fear in the
Institutions are confused by the action in Germany
because the regulators have basically changed the rules of the game.
Institutions are worried that the proposed changes in U.S. regulations
are going to make it more difficult to protect risky positions in
equity markets. What this means is large investors are unsure how they
are going to hedge their exposure in the markets and instead have
chosen to pare back positions to reduce the possibility of large
losses. Without knowing what the regulators are going to allow them to
do, it doesnâ€™t make sense to take on added risk so liquidation seems to
be the only viable option.
In addition to confusion over
regulatory issues, investors are blowing out of risky commodity-linked
currencies because they feel the Euro Zone debt problems are going to
derail the global economic recovery. This means the real possibility of
a global double-dip recession.
Hedge funds and large investors
continue to divest out of the commodity-linked Australian and New
Zealand Dollars. Traders feel that the spread of Euro Zone debt woes
will curtail the global recovery and lead to a drop in demand for raw
Falling crude oil is triggering a huge break in the
June Canadian Dollar. This morningâ€™s surge has put this market in a
position to take out the recent bottom on the daily chart at .9293.
This is a minor point on the long-term chart. A drive through the
February 2010 bottom at .9271 is likely to trigger more weakness which
will threaten the structure of the bull market in the Canadian Dollar.
buying is driving June Treasury Bonds sharply higher. This morningâ€™s
trading action took out the recent high at 124â€™16. Upside momentum
seems to be indicating that another surge is likely. The move in the
T-Bonds is more reactionary than speculative with investors taking
their cues from the falling equity markets.
June Crude Oil is
trading sharply lower on its expiration day. The price action seems to
be indicating that no one wants to own crude oil. Liquidation of risky
assets is one reason for the weakness. Traders have been treating crude
oil as a hedge against the Dollar. Now that the U.S. Dollar is clearly
on a path to move higher, there doesnâ€™t seem to be any reason to hold
on to long crude oil positions.
Fundamentally, a slow down in
the global economy is likely to lead to a drop in demand for energy
products. This will no doubt help drive up oil inventories. The break
through the February bottom at 72.43 by the September contract
indicates that more downside pressure can be expected.
is trading lower, but downside momentum is slowing. This means that
gold is nearing a value area which may be attractive to buyers. The
charts indicate that a 50% level at $1167.90 is likely to be tested.
Donâ€™t be surprised if fresh buyers show up to trigger a technical