Wednesday November 10, 2010 - 14:22:53 GMT
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E-mini S&P Feeling No Pressure after Reversal Top
The December E-mini S&P 500 is trading flat after
posting a closing price reversal top on Tuesday. The lack of follow-through to
the downside means the signal hasnâ€™t been confirmed yet, setting up the possibility
of a rally back to 1215.50.
On the downside, the short-term picture indicates that an
uptrending daily Gann angle at 1207.75 is the first support today. Based on the
near-term rally from 1167.75 to 1224.75, this market could break into a
retracement zone at 1196.25 to 1189.50.
Another uptrending Gann angle at 1187.75 forms a support
cluster with 1189.50 on Thursday. The closing price reversal pattern usually
suggests a 2 to 3 day break so if a rally fails today at 1215.50, donâ€™t be
surprised if it weakens into the close.
Stock traders will be focused on the Dollar this morning and
the developing sovereign debt issues in the Euro Zone. Aversion to risk could
put pressure on the stock indices. With risk sentiment still a concern; any
rally will likely be triggered by either oversold conditions or short-covering.
The December British Pound strengthened this morning after
the Bank of England said inflation may continue to accelerate above its 2
percent target, reducing the chances that the central bank will reignite asset
Overnight the BoE said its officials are having a â€śvigorous
debateâ€ť over the risks of inflation. In its inflation report, the central bank
said near-term inflation is expected to be higher than in August, and consumer price
growth above its target through 2011.
Bearish traders got spooked a little following the report,
triggering a mild short-covering rally. While the report was enough to
establish support, buying wasnâ€™t strong enough to mount a significant challenge
against the recent top.
Based on this morningâ€™s action, it looks as if the BoEâ€™s
â€śwait and seeâ€ť monetary policy approach is not likely to change until the
central bank gets a chance to assess further economic releases. After Tuesdayâ€™s
sell-off, it looks as if this morning traders are only making position
adjustments to reflect the central bankâ€™s attitude.
Technically, the Sterling
is trading higher after testing an important 50% level at 1.5974. In addition,
it held yesterdayâ€™s low at 1.5951. An uptrending Gann angle at 1.5950 forms a
support cluster at 1.5951 to 1.5950. A failure to hold this zone is likely to
trigger a break to the .618 level at 1.5897.
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