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Bearish Comments Sink Stocks into Close

James Hyerczyk from ForexHound.com at 10/22/09


Stocks tumbled late in the trading session to finish lower for the day after bank analyst Dick Bove downgraded Wells Fargo Bank to a “sell.”  In addition, stores circulated that Wal-Mart executives warned that the Christmas season would be “tough.”  The technical closing price reversal indicates a possible top which could start a 2 to 3 day break.  Today’s trading action has also made this market susceptible to a weekly reversal down which would be a more significant indication of a major top.


Treasury futures closed lower for the day.  Strong demand for higher risk assets drove up competing yields in T-Bonds and T-Notes.  Today’s late session break in U.S. equity markets had little effect on Treasuries, but if there is a follow-through break tomorrow then look for December Bonds and December Notes to rally as traders seek the safety of lower yielding assets.


The U.S. Dollar was driven to a 14-month low as appetite for risky assets drove investors out of the U.S. Dollar and into the better yielding equity markets.  The December Euro pushed through 1.5000 without much fanfare.  Traders are still being cautious about this level and the threat of an intervention.  The December British Pound was strong all day boosted by positive Bank of England minutes.  Higher crude oil and equities helped the December Canadian Dollar, but with the threat of an intervention looming, don’t expect too much of a rally.


December Gold once again failed to make a new all-time high while the Dollar reached a 14-month low.  There could be a divergence forming which would be bearish for gold.  This market is in a range of $1043.70 to $1072.00.  A break under the low end of the range should trigger an acceleration to $1028.80. 


December Crude Oil popped through $80.00 as a drop in gasoline stocks triggered a rally in crude oil.  Crude oil supply is ample and demand is down because the refineries are not working at full capacity.  Nonetheless speculation, higher stocks and a weaker Dollar are driving up crude oil prices.  The question is where are the sellers?  This market has divorced itself from the fundamentals.  Higher gasoline prices amounts to a tax on the consumer.  This is likely to lead to a further drop in demand.


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