Monday July 26, 2010 - 20:51:59 GMT
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Dow Turns Positive for Year; New Home Sales, FedEx Forecast Boost Stocks
News that U.S.
New Homes Sales beat estimates and FedEx boosted its forecast helped drive the
Dow Jones Average up this morning, helping to erase all of its 2010 loss. Of
the three major indices, the Dow Jones looks to be the strongest.
Technically, the September E-mini Dow Jones futures contract
turned the main trend up on the daily chart with a move through 10367. The
chart indicates the market is in a position to test the .618 retracement level
at 10516 and the June top at 10536 over the near-term. The September E-mini
S&P 500 turned its trend up on the trade through 1099.25. This market is
struggling at a 50% level at 1107.00. Holding above this level could launch an
acceleration to the June top at 1129.50. Finally, the September E-mini NASDAQ
is in an uptrend on the daily chart. Holding the 50% level at 1875.75 could
help drive this market to the 61.8% retracement price at 1917.75.
Cycle watchers are looking for a top this week which could
lead to a tremendous sell-off by the end of the week. The move may start today
especially since it looks as if the intra-day rally has stalled. The best sign
of a top formation will be a closing price reversal top by the end of today.
Those looking for a top in equities should watch the
Treasury markets for clues. Today the September T-Notes and T-Bonds weakened
when the better than expected housing data was released. A reversal down in
equities is likely to trigger a short-covering in the Treasurys late in the
Despite questions about how the European bank stress tests
were conducted, investors seemed satisfied enough with the results early this
morning to underpin the Euro while waiting for fresh news regarding the U.S.
Following the release of U.S. new home sales data which saw
an increase in June by more than economists had forecast, the Euro rallied and
is now pressing a minor .618 retracement level at 1.2998. This puts this pair
in a position to challenge last weekâ€™s high at 1.3028.
Stocks extended their gains following the housing report,
driving up demand for higher risk assets, helping the Euro maintain the upward
momentum which helped drive the market higher late last week.
The British Pound is higher this morning but momentum slowed
when the market neared a weekly swing top at 1.5523. A breakout over this level
will turn the main trend up and set up a possible acceleration to a major 50%
retracement level at 1.5635.
Fundamentally the Sterling
is being driven higher by last weekâ€™s release of better than expected second
quarter GDP. Last weekâ€™s news that the U.K. economy expanded by a strong
1.1 percent was a sign the economy was more stable than previously estimated.
This news led some investors to believe that the Bank of England will have to
seriously consider raising its benchmark interest rate sooner than expected.
As the Pound approaches a key retracement level at 1.5635,
investors have to realize that the second quarter expansion took place before the
government implemented its proposed deep spending cuts and tax hikes. The
biggest fear amongst bullish traders is that the governmentâ€™s proposed
austerity measures will curtail the gains that the economy is currently
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