Monday November 8, 2010 - 14:56:41 GMT
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U.S. Equities Trading Slightly Lower; Emphasis Shifts to Economy
equities are called slightly lower this morning after trading in a tight range
overnight. News that peripheral debt problems are resurfacing in Ireland is
pressuring the Euro, leading investors to take a little risk off the table.
Now that the Fed has laid its quantitative easing plan on
the table, the emphasis is going to shift to economic reports. Friday‚Äôs U.S. jobs
report was better-than-expected, triggering a rise in stocks, but the overnight
weakness indicates that investors want to see more. Rather than just one-time
events, investors would like to start to see up trends developing in the
reported a drop in industrial output. This news helped weaken the Euro while
triggering profit-taking breaks in all risk driven currencies.
The U.S. Dollar will be watched closely today. If it
continues to rise sharply, selling pressure could be on the stock market all
The Euro is down across the board on Monday amid concerns
that peripheral debt problems are resurfacing. Issues began to resurface last
week, culminating on Friday when the 10-year Irish Bond yield stood at a record
spread over the comparable German debt and similar Spanish/German yield gap rose
to its highest level since mid-July.
The European Central Bank last week left its benchmark
interest rate unchanged but it also did not reveal any plan to expand its
quantitative easing program unlike its U.S. Federal Reserve counterpart.
ECB President Jean-Claude Trichet offered no insight when he
said during his post-meeting press conference that he could not say if the
easing was over. The resurfacing Irish debt issues indicate that the ECB still
has serious problems to deal with before thinking about implementing a more
accommodative monetary policy.
An unexpected fall in German industrial output also
contributed to the Euro‚Äôs weakness overnight. Overnight it was reported that
German industrial output fell by 0.8 percent on the month in September, missing
median guesses for a 0.5 percent increase.
Selling pressure began to hit the Euro on Friday when the U.S.
government reported better-than-expected jobs data. Last week the Fed also
announced its quantitative easing plan. This news was already priced into the
December Euro so investors are likely going to start putting more emphasis on U.S.
Technically the main trend is up on the daily chart so the
current weakness can still be called corrective in nature, triggered by
profit-taking. The two bottoms at 1.3733 and 1.3698 need to be violated before
the trend turns down.
At this time, the market is testing a minor retracement zone
at 1.3990 to 1.3921. This zone is based on the short-term range of 1.3698 to
1.4282. A pair of uptrending Gann angles at 1.3828 and 1.3763 may slow down the
rate of decline and also trigger technical bounces.
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