U.S. Equities Holding Steady Overnight; Retracement Zones Underpin Markets
equity markets tried to mount a strong comeback rally on Tuesday but fell apart
into the close. Early in the session stock indices made a recovery from their
lows, boosted by bottom-picker demand and driven higher by better than expected
manufacturing data. For a while it looked as if U.S. equity markets would trade
higher as traders shifted away from risk aversion and more toward the
potentially bullish outlook for the global economy. This scenario didnâ€™t hold
into the close however as risk fears regarding Europe
and a sell-off in oil drilling stocks were too much for bullish investors to
The weak close put the June E-mini S&P 500 at a minor
50% level at 1071.75. Downside momentum took this price out overnight which
could set up a further decline to the .618 price level at 1063.50 later in the
day. The new chart pattern is bearish but oversold. A new swing top has been
formed at 1106.75. A break out over this price will turn the main trend to up.
Holding the retracement zone at 1071.75 to 1063.50 will help
support this market on the opening today, but a failure in this zone indicates
more downside pressure is likely.
The June E-mini NASDAQ appears to be the strongest market at
this time. This pattern started early last week when the index made a secondary
higher bottom at 1754.25 slightly better than the previous swing bottom at
Overnight this market posted an inside move after closing
near the low on Tuesday after giving back a substantial intraday gain. The lack
of follow-through to the downside overnight could be a sign that bids are
holding up the market or that traders remain non-committal toward the market
ahead of Fridayâ€™s Non-Farm Payrolls Report. A sell-off after the opening could
trigger a break into a retracement zone at 1814.25 to 1800.00.
The June E-mini Dow is trying to build support at a
retracement zone at 10017 to 9956. A successful test of this zone could trigger
the start of a short-covering rally because it will indicate the formation of a
secondary higher bottom.
Stocks will be sensitive to risk sentiment today along with U.S. economic
reports. Trading may be range bound at times today ahead of Fridayâ€™s Employment
Report. Thin trading conditions could also lead to volatile conditions at
The oil drillers sub-sector may take another hit today,
triggered by British Petroleumâ€™s inability to cap the oil leak in the Gulf.
Banks may also see selling if news from the Euro Zone continues to indicate
banks face exposure to debt write downs.
The stronger U.S. Dollar and news that the International
Monetary Fund sold gold is helping to pressure August Gold this morning. This
market is still in an uptrend and in a strong position, but may begin to weaken
if this market begins to break under $1219.50. This would set up a further
break to the 50% level at $1209.70.
At this time the chart pattern is still bullish, but
condition could shift if the Dollar continues to strengthen. The market may be
making a secondary lower top which will indicate a topping formation, but this
pattern will not be confirmed until this market breaks below $1209.70.
The main trend is down in September Crude Oil but the market
is holding a 50% retracement level at 73.64. As long as this price holds, there
is still an outside chance of a rally back to 80.88. The current developing
pattern will have to rely on the Euro for the push higher. The supply/demand
picture remains bleak so it is going to have to take an increase in demand for
higher yielding assets to drive it higher.
The June Japanese Yen is the featured currency today. The
Yen is trading lower, pressured by the news of the resignation of Japanese
Prime Minister Hatoyama.Traders are
dumping the Yen which means money has to be flowing into another safe haven
The Yen is under pressure on speculation that the next prime
minister will be NaotoKan who favors a weaker currency.
Technically, the June Japanese Yen is in a weak position after
breaking a 50% support level overnight at 1.0954. This set up the break to the
current overnight low at 1.0854. A break under this price could trigger an
acceleration to the downside.
After building a support base throughout the day on Tuesday
while reacting to the sideways trade in the equity markets, September Treasury
Bonds mounted a strong rally late in the session, indicating that they may be
poised to launch the start of another leg higher.
For the fourth consecutive day, T-Bonds held the June 27th
bottom at 122â€™05, indicating that there was still buying interest in the
contract. At the same time the market attempted to regain an uptrending Gann
angle at 123â€™14. Although the market is currently on the bearside of this
angle, it isnâ€™t going to take much to turn the T-Bonds bullish again if this
angle is recovered. The minimum upside objective is a minor retracement zone at
124â€™04 to 124â€™19. If support can be established in this zone, then look for a
retest of the contract high at 126â€™05.
The T-Bonds are dependent upon the stock market for
direction at this time. If stocks get hit hard then the money flow out of
stocks and into the safety of the Treasuries is likely to launch a strong
rally. What could be slowing down the upside action in the Treasuries is
renewed interest in the U.K. Gilts as a safe-haven alternative to weakness in
the Euro. There was evidence on Tuesday that nervous money was leaving the Euro
and flowing into the British Pound. Any new problems arising in the U.K.
regarding its debt load is likely to drive additional funds into U.S.
Treasuries. This developing bullish scenario is likely to hold as long as
support at 122â€™05 remains intact.
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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
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15:00 US- final University of Michigan
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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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