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Lack of Buyers Weaken Stocks

James Hyerczyk from ForexHound.com at 12/29/09


U.S. equity futures are trading weaker at the mid-session following an early morning surge after the release of a report showing a rise in consumer confidence. Thin trading conditions and the lack of buyers are the driving forces behind this morning’s weakness.

Global stock prices rose overnight following a sell-off in the Dollar, signaling greater demand for higher yielding assets. The thought of a recovery in the U.S. economy is also contributing to the strength. Money is shifting out of U.S. Treasuries and into equities as end-of-the-year asset allocation continues.

Treasuries are trading higher at the mid-session following early morning weakness. Look for the T-Bonds to feel pressure as long as it remains under 115’08. Regaining this level could trigger the start of a short-covering rally. Traders are also expressing concerns over the growing U.S. debt situation and the Treasury’s ability to service it.

February Gold fell sharply as the Dollar strengthened following the release of the friendly U.S. Consumer Confidence figure. Thin, conditions due to the shortened trading week ahead of the New Year’s holiday are also helping to keep bullish traders on the sidelines. Regaining a key 50% level at $1107.40 could trigger a short-covering rally later in the day.

March Crude Oil backed off from earlier highs and is now trading lower. The key number that has to hold is 79.27. A close below this level for the second straight day will be an indication that the market is overpriced. Technical factors are indicating this market has hit overbought levels.

The U.S. Dollar erased earlier losses following the report of a rise in Consumer Confidence. Although the reported figure of 52.9 was slightly less than estimates, it still reflected continuing strength in the economy. This morning the S&P/Case Shiller report on home prices was flat. There was almost no reaction to this report by Forex traders.

The Dollar was down overnight as traders took advantage of the thin, holiday trading by taking profits after the almost month-long rally. Demand for higher yielding assets also contributed to the weakness for the second day in a row buoyed by a rise in global equity markets. Finally, some of the selling pressure can be attributed to concerns over rising debt in the U.S.

The March Euro is trading lower at the mid-session following the friendly U.S. Consumer Confidence report. Overnight the Euro was boosted by a report showing rising prices in Germany.

The March British Pound is trading in a wide range today with a bias to the downside. Overnight the British Pound popped to the upside overnight as traders returned to work after an extended holiday. The market was unable to hold on to its gains, however, and retreated to the downside. Investors are still concerned about the U.K. budget deficit and struggling economy. Sellers hit the market hard following the release of the U.S. Consumer Confidence figure. The selling pressure took out three days of lows and negated the thought that a support base was being built.

The March Japanese Yen broke out of its tight range on speculation of a U.S. economic recovery following the release of the rise in Consumer Confidence. Demand for higher yielding assets is also contributing to the Yen’s weakness.

The March Swiss Franc fell back below the old bottom at .9675 following an overnight acceleration to the upside through this level. This put the market in a weak position once again following seven days of strength. Signs of a U.S. economic recovery are helping to strengthen the Dollar.

The rally in the March Canadian Dollar appears to be ending as earlier gains are being erased following the release of a friendly U.S. Consumer Confidence report. Last night’s trading action took out a main top at .9609 to reaffirm the uptrend. A break back through .9574 could trigger an acceleration to the downside.

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