Wednesday September 29, 2010 - 04:43:36 GMT
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T-Bond Yields Fall on Weaker-than-Expected Consumer Confidence
December Treasury Bonds spiked to the upside after the
Conference Board reported a bigger-than-expected slide in consumer confidence.
The S&P/Case Shiller home index also showed weakness.
T-Bond yields plunged after investors concluded that todayâ€™s
weak reports almost solidified that the U.S. Federal Reserve would begin
another round of quantitative easing. Traders also ignored an article in The
Wall Street Journal saying that investors were overestimating the size of the
Fedâ€™s QE plan. Later this week, the U.S. will report GDP. This report
should be a market mover.
Weaker than expected U.S. economic reports triggered a surge
in the December Euro, taking out Mondayâ€™s closing price reversal top and a
major 50% retracement level at 1.3510.
The December E-mini NASDAQ confirmed Mondayâ€™s closing price
reversal top at 2032.00. This market
broke hard after two weaker than expected economic reports, but investors
shrugged them off, sending the market slightly higher for the day.
The chart pattern suggests that a break through the swing
bottom at 1962.50 will turn the main trend down on the daily chart. The
reversal pattern indicates that a break to 1741.00 is possible over the
The news that the U.S.
economy weakened overshadowed concerns about sovereign debt issues in Spain and Ireland. This remains the only
factor that could exert a bearish influence on the Euro. As long as the U.S. economy remains weak, the
greater the chance the Fed will use quantitative easing to try to prevent the
economy from derailing. QE puts more liquidity into the economy thereby
weakening the Dollar.
Technically, if the Euro can sustain itself above the 50%
level at 1.3510, then look for the rally to continue to the Fibonacci level at
The December British Pound fell sharply on Tuesday,
triggered by negative comments from Bank of Englandâ€™s Adam Posen regarding more
quantitative easing. Posen said that more QE is going to be needed in order to
lead the UK
economy to full recovery. Posen suggested that further fiscal stimulus and
corporate debt buying might be needed if this round of QE is not enough.
Despite recent news to the contrary regarding better than
expected GDP and high inflation, Posen believes that the UK economy may fall into a cycle of
low growth for a long period of time although he dismissed predictions of a
double-dip recession. The type of scenario he is forecasting is usually marked
by high unemployment and low growth.
Technically, the British Pound fell after Posenâ€™s speech,
triggering a hard sell-off and lower close. The closing price reversal
formation is indicative of a top. This pattern often leads to the start of a
two to three day break highlighted by a 50% retracement of the last rally.
Based on the last rally of 1.5503 to 1.5894, the retracement
zone is 1.5698 to 1.5652. An uptrending Gann angle is at 1.5616.
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