The December E-mini S&P 500 confirmed
Tuesdayâ€™s closing price reversal top, but investors showed up following the dip
to 1201.75, indicating the possibility of a strong retracement rally.
Based on the short-term range of 1224.75 to
1201.75, traders should watch for a possible retracement rally into 1213.25 to
1216.00. If this market is topping, then this retracement zone is the next
possible target for a secondary lower top.
The low at 1201.75 came as a surprise as
the charts indicated a likely break to 50% of the 1167.75 to 1224.75 range at
1196.25. Nonetheless, U.S.
traders have grown accustomed to buying breaks, but failing to reach the 50%
area indicates that traders wanted in instead of waiting for a test of the best
Stock traders will be focused on the Dollar
throughout the day and the developing sovereign debt issues in the Euro Zone.
Equities are likely to hold on to there gains if the Dollar doesnâ€™t strengthen
into the close. Traders should watch the action around 1207.75. Breaking back
under this level will indicate impending weakness.
The December British Pound is up sharply at
the mid-session following a friendly assessment of the U.K. inflation
situation by the Bank of England.
The British Pound began to strengthen 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 purchases.
Bearish traders got spooked a little
following the report, triggering a mild short-covering rally which continued to
build throughout the New York
Based on todayâ€™s trading 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.
Following Tuesdayâ€™s weak showing, traders seem to be adjusting short-positions
to reflect the BoEâ€™s latest outlook.
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
Todayâ€™s strong surge has put the market in
a position to test a minor retracement zone at 1.6125 to 1.6165.