Saturday September 25, 2010 - 02:19:33 GMT
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Bullish Pressure Finally Forces Short Stock Traders to Give Up
The December E-mini S&P continued its rally this week,
bucking the seasonal tendency and pretty much assuring that September will be
an up month. This index was choppy this week, but eventually bullish investors
were paid off when the market rallied on Friday.
Tuesdayâ€™s Fed statement, hinting at more asset buying,
should have been enough to launch a rally, but investors were nervous about
buying strength, triggering violent swings. Eventually the bulls won the battle
as buyers defended the low for the week twice before finally pressuring the
shorts enough to give up their positions.
The charts are now indicating that 1155.00 to 1160.75 is the
next upside target.
December Gold traded through $1300.00 for the first time in
history without much fanfare. There is really not much to talk about until Gold
does something to catch my eye. Currently the rally looks pretty normal. Iâ€™m
looking for either a spike up to indicate exhaustion or a dramatic closing
price reversal top. The swing chart indicates that $1318.10 is the next upside
target on October 4. A move to this price on this date will mean the market is
balanced. There is nothing exciting about that.
The U.S. Dollar finished sharply lower this week after the
Fed strongly hinted that it would provide more aid to prevent the economy from
derailing. Foreign currency investors reacted as if the Fed had given them the
green light to sell the Dollar, delivering a crushing blow to the greenback against
all major currencies.
Many investors now feel based on the tone of the Federal
Open Market Committeeâ€™s statement that it was getting ready to rev up the
Treasury printing press for another round of quantitative easing in
The December Japanese Yen finished the week higher after
ending last week in a position to breakout to the downside. The rally in the
Yen triggered a retracement of the entire â€śintervention breakâ€ť from over a week
ago. The inability to follow-through to the downside may have served as further
proof that interventions are hard to pull-off without the help of other central
For several weeks prior to the intervention I had warned
first intervention in over 5 years would likely fail if the Bank of Japan was
forced to go it alone. With almost every major central bank facing economic
problems of their own, it was highly unlikely that they would buy Dollars and
sell Yen just to help Japanâ€™s
economy improve. In fact, after the Fed hinted hard at additional quantitative
easing, some accused it of deliberately weakening the Dollar, thus reducing the
impact of the BoJâ€™s intervention.
Late in the week, the Japanese Yen broke sharply lower
overnight on speculation that the BoJ had intervened again. This proved to be a
rumor and the Yen resumed the rally it had begun earlier in the week.
Without the cooperation of other central banks and facing a
economy, it is likely the Japanese Yen will continue to rally next week with
very little chance Japanese officials can stop it from appreciating further.
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