Friday September 17, 2010 - 12:55:04 GMT
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U.S. Equity Markets Breaking Out to Upside
Increased demand for higher risk assets overnight is helping
to drive U.S.
equity markets overnight. After several
days of sideways trading, and the appearance that the markets were going to
remain rangebound, the December E-mini S&P 500 finally broke out to the
upside; leading to speculation that today may be a â€śrisk onâ€ť day.
Overnight the S&P took out two former tops at 1122.00
and 1124.50, and a key Fibonacci level at 1128.00. Now that the market has
broken out over this level, look for them to become new support. The daily
chart indicates there is room to rally up to at least 1160.75 over the near
term. On the downside, a failure to hold support could trigger the start of a
break to 1103.25.
Greater demand for risky assets is also helping to pressure
December Treasury Bonds. Currently this market is testing a Fibonacci level at
129â€™11 and a Gann angle at 129â€™10. Look for a test of the weekâ€™s low at 129â€™05
if this support cluster is violated. The daily swing chart indicates 128â€™05 is
a potential downside target.
Fundamentally, the T-Bonds are a tricky market at this time.
Fed buying and weak economic reports should be supportive, but there is new
supply hitting the market this week because of a new Treasury auction. In
addition, there may be an allocation going on between equities and debt.
November Crude oil has sold off this week because of
concerns over increased supply. Technically the main trend on the daily chart
is up as long as the 74.24 bottom holds. An uptrending Gann angle and 50% level
at 75.49 and 75.18 respectively is currently providing support. Increased
demand for risk could help drive this market higher.
Higher crude oil prices and increased appetite for risk are
helping to support the Canadian Dollar overnight. It looks as if it could be a
â€śrisk onâ€ť day today which will be beneficial to all the higher yielding
Another session of selling pressure in the crude oil market
helped weaken the Canadian Dollar on Thursday, sending the U.S. Dollar slightly
higher against the Loonie. Thursdayâ€™s trading session also had a â€śrisk offâ€ť
theme which triggered some light shedding of higher risk assets, contributing
to the Canadian Dollarâ€™s weaker tone.
Technically, following a recent sharp rise, the December
Canadian Dollar formed a daily closing price reversal top which was confirmed
on September 15. The lack of follow-through to the downside helped to prevent
this market from finishing its counter-trend retracement to .9636. A rally through
.9768 will negate the reversal top and likely trigger an acceleration to the
Overall, there are concerns the Canadian economy is slowing
down. Lower crude oil is hurting exports, but the weaker U.S. economy may be having a bigger
influence on the Canadian economy than estimated earlier. Some traders are
saying that the Bank of Canadaâ€™s recent rate hike may do more harm than good
for the economy.
The December Euro is trading sharply higher overnight as
speculative buyers continued to drive the market on the notion that the Euro
Zone economy will recover faster than the U.S. economy.
On Thursday the Euro rose to its highest level in more than
a month after a strong debt auction in Spain relieved investor concerns
about the countyâ€™s ability to tap capital markets for investment. The rally
took the market to 1.3116, the highest level since August 11, as investors
perceived the success of the Spanish auction as a sign that the countryâ€™s
sovereign debt issues from the Spring were subsiding.
The December Euro is trading higher overnight but in a tight
range as capital markets are still adjusting to the huge intervention which
began on Tuesday night. Trading has slowed to a crawl as investors assess the
impact of Wednesdayâ€™s intervention and the outlook for further Yen selling from
Many feel that the Japanese government is not finished
weakening its currency and are unwilling to step in the market on either side
until there are signs of breakout in either direction. A small group of traders
seem to be willing to buy the support and sell the rallies while the market
remains inside of its tight range.
The market appears to be drifting lower at a slow pace. The
daily chart indicates that a break through 1.1557 is likely the trigger point
for the start of an acceleration to the downside.
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