Monday September 13, 2010 - 13:47:30 GMT
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Change in Banking Regs, Chinese Economy Help Boost Equities
U.S. Equity markets are expected to open sharply higher
after an agreement by global regulators on the size of bank capital reserves
and strong Chinese economic data encouraged traders to demand higher yielding
Over the week-end, global banking regulators agreed to close
to triple the size of capital reserves that banks must hold against losses.
On Saturday, China
posted a report which showed industrial production was stronger-stronger than
expected. Chinese retail sales also rose while August inflation of 3.5% was
reported at the pre-report estimate. This helped squelch rumors of another
round of monetary policy tightening by the Chinese central bank.
The money which left the Treasury and Gold markets last week
is being put to work this morning in the global equity markets.
The September E-mini S&P is trading sharply higher
having come close to gapping last weekâ€™s high. Upside momentum is building
which could mean a test of the August top at 1127.75. The question this morning which must be
answered is whether U.S.
investors will chase this market higher from the get-go or wait for an early
The liquidation break continued in the December Treasury
Bonds this morning with this market trading down to the Fibonacci retracement
level at 129â€™11. The daily swing chart indicates that 128â€™05 is a potential
downside target by September 17. Short-term oscillators are indicating slightly
oversold conditions which may trigger a short-covering rally especially since
the Fib level objective was reached. The
50% level at 130â€™17 is a potential upside target.
November Crude Oil popped to the upside overnight as demand
for higher yielding assets soared on the Chinese news. This market regained a
50% level at 77.70 but has since backed off. Support is being provided by an
uptrending Gann angle at 77.49, but the market may weaken if this level is
violated. The short-term chart indicates that 79.17 is a potential upside
target by September 16 or 17.
Overall the theme today is bullish, but U.S. investors
will be the key to sustaining the overall bullishness. There is plenty of cash
available to invest but the tendency of U.S. equity traders is to buy
pullbacks. This may indicate that an early break may be necessary to attract
Before the opening the bulls are clearly in control, itâ€™s
just a matter of when and where U.S.
investors will show an interest on the long side.
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