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Equity Futures Surge as Appetite for Risk Returns

James Hyerczyk from ForexHound.com at 11/04/09


Renewed interest in higher risk assets is helping to drive up stocks and commodities while pressuring the U.S. Dollar and interest rate futures. Aggressive traders seem to be betting big that the Fed FOMC policy statement this afternoon will contain language stating that an interest rate hike is not likely until at least the middle of 2010.

Stock indices are trading sharply higher although they have backed off there highs. The December E-min S&P came close to a 50% price objective at 1062.50 before falling back. This price is still today’s main upside target, followed by 1071.00. A bearish Fed report could break the market back to 1041.50. A move through 1026.00 will do serious damage to the market.

December Treasury Bonds and Notes are trading lower at the mid-session. Traders are reacting to the possibility the Fed will soften its language in its policy statement regarding keeping rates low for an “extended period”. The retracement zone at 118’24 to 117’18 is currently holding as support. Things could get ugly if this area is violated to the downside.

The U.S. Dollar is trading sharply lower at the mid-session against most currencies with the exception of the Japanese Yen. Speculators are betting big that the Fed FOMC statement will indicate there still is time to buy higher risk assets before the Fed begins tightening.

December Gold posted a strong gain overnight but backed off as it approached $1100. Speculators are still driving this market in anticipation of more central bank buying. New support has been established at $1072.00. Any news from the Fed that weakens the Dollar could send gold screaming to the upside. A breakout over $1100 is anticipated, but a failure to hold this level into the close following a breakout will be a sign of a short-term top.

December Crude Oil received a boost from a lower than expected oil inventory report. This news combined with higher equities and a weaker Dollar helped the market rally back to within striking distance of its high for the year at 81.99. Speculators are still in charge, but getting much needed help today from the outside markets.

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