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Equity Markets Eke Out Small Gain in Choppy Trade

James Hyerczyk from ForexHound.com at 11/17/09


Stock Index futures eked out a small gain in a choppy, two-sided traded.  The stronger Dollar was the driving force behind much of the early selling pressure.  The inability to break the Dollar in the afternoon triggered an intra-day short-covering rally in the equity markets into the close.  Conditions are close to being overbought which could mean that a pull-back may be in the offing.  Traders are also beginning to question whether the stock market is too far ahead of the economy given the recent bearish statements by Fed Chairman Bernanke. 


Treasury markets posted a small gain today after spending much of the morning on the down side.  Today’s rally was most likely a follow-through rally following yesterday’s strong surge to the upside.  On Monday, Fed Chairman Bernanke reiterated the statement from the Fed FOMC committee which called for lower interest rates for a prolonged period of time.


The U.S. Dollar managed to close higher today despite late session attempts in New York to erase earlier gains.  This is strong evidence that most of today’s rally was due to short-covering rather than fresh buying.  Comments from ECB President Trichet were supposed to show support for Bernanke’s comments from yesterday, but actually helped ignite the rally in the Dollar.  Technically, the Dollar is oversold on the daily chart.  This is another reason for today’s up move.


December Gold managed to post a small gain even though the Dollar finished higher.  Gold felt pressure early in the trading session when the Dollar opened up strong.  Throughout the day, the Dollar began to give back most of its gains which helped gold erase all of its losses.  Central bank activity as well as speculation has been contributing to the strength in the gold market.


January Crude Oil treaded water early in the trading session, but was held up by higher Unleaded Gasoline and Heating Oil.  The failure to break the products and the intra-day weakness in the Dollar helped crude oil manage to post a small gain.  Speculation, higher equity prices and the lower Dollar have been the driving forces supporting Crude Oil.  The supply/demand situation for the most part has been ignored. Tomorrow’s inventory report is likely to set the tone in the market. Furthermore, if the economy continues to remain weak as the Fed has implied, then look for this to be reflected in less demand.

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