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Equity Traders Optimistic about Earnings after Today's Better GDP Number

James Hyerczyk from ForexHound.com at 10/29/09


Today’s surge in the equity futures markets helped stocks recover close to 50% of their recent decline.  This move represents optimism about corporate earnings.  Traders should watch equity markets carefully after the huge run-up today.  The lack of follow-through to the upside could be a sign of weakness, giving traders an excuse to get short again.


December Treasury futures finished the trading day lower.  Today’s bullish GDP report has brought the Fed closer to tightening its monetary policy.  This is making traders think that interest rates may rise sooner than expected.  Furthermore, when equities and commodities move higher, investors start asking for higher yields.  This is the reason for the weakness in the December T-Bonds and December T-Notes today.


The U.S. Dollar closed sharply lower against most major currencies with the exception of the December Japanese Yen.  It was under tremendous pressure today as traders have increased their demand for higher yielding currencies.  Today’s break erased all of the Dollar’s gains from yesterday. 


The strongest currency was the December British Pound.  The other currencies are showing strength today, but are only retracing 50% of the decline for the week.  Like the equity markets, these markets have to take out the retracement zones and finish near the high of the day to indicate real strength.  Otherwise it looks like we are in the midst of a short-covering rally.


December Gold closed sharply higher and finished just short of a key 50% price. The charts indicate that $1049.40 to $1054.70 next potential upside target.  Fresh selling may come in at this zone.  December Silver has a similar pattern developing with 17.15 to 17.39 its potential upside target.


The better than expected U.S. Third Quarter GDP number helping to boost December Crude Oil   Higher equity prices, the lower Dollar and increased speculation also provided support.  Like the equities and currencies, this market may be only retracing this week’s break. 

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