Thursday October 21, 2010 - 02:17:46 GMT
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U.S. Equities Rebound to Post Strong Gains
One day after U.S.
stocks fell sharply amid mixed corporate earnings and as China raised interest rates for the
first time since 2007, the major indices extended their broad-based rally
Wednesday, buoyed by a positive outlook for the financial sector and a
spattering of strong earnings reports from airline and commodity related
Amid speculation that banks will be forced to buy back bad
mortgages, Apple, Inc. earnings that missed analyst forecasts and after Chinaâ€™s central bank raised interest rates, the US 30
declined into the close on Tuesday, leading some investors to believe that more
downside action was likely.
The major stock indices firmed overnight however, on the
heels of the resumption of the U.S. Dollar sell-off, driving up demand for
higher yielding assets. After forming a support base throughout the day, all
three major futures indices mounted a strong rally into the close following the
afternoon release of a less than stellar Fed Beige Book.
In its report, the Fed said that U.S. economic activity continued to
rise modestly in September and early October. Growth picked up in several
districts, but many areas showed continued signs of sluggishness. The reserved
outlook for the economy seemed to be what investors wanted to hear because it
fueled speculation that the Fed will boost purchases of government debt in an
attempt to stimulate the economy.
With the Beige Book reiterating the call for quantitative
equities remain poised to move higher. Based on Wednesdayâ€™s positive reaction
to the Fed report, investors are likely to continue to drive these markets
higher on the growing perception that the economy is growing but not
The firm trade at the close has put this market in a
position to challenge the high for the week at 1182.25.
As we approach the end of the week, last weekâ€™s close at
1175.00 becomes most important. This week marks the eighth week of higher tops
and higher bottoms, making this market vulnerable to a weekly closing price
Traders should watch the action around 1175.00 to see if the
E-mini S&P 500 is attracting selling pressure. Although a close under this
price is what we are looking for to form the reversal top, this price may act as
a pivot price over the next two days.
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