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Stock Indices Confirm Yesterday's Reversal Top

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


Early weakness in the December E-mini S&P 500 took out yesterday’s low and confirmed the closing price reversal top at 1098.50. Buyers stepped in as usual on the dip triggering a short-covering rally. The chart suggests that there may be one more rally to 1084.25 before the downtrend resumes.

Treasury futures have been trading sideways to lower for much of the day as traders await direction from the stock market. Gains have been limited to the upside as traders are beginning to price in next week’s auction. With a labored rally taking place today, it looks like it is going to take a substantial break in equities to trigger a sharp rise to the upside.

The U.S. Dollar is trading better at the mid-session. Weaker equity markets have forced traders to become a little more risk averse after yesterday’s break. The December Euro is trading both side of $1.50 in an effort to establish support at this price level. Lower equity and crude oil prices are pressuring the December Canadian Dollar. The break in the stock market is encouraging traders to pull money out of the Japanese Yen.

December Gold is feeling pressure because of the weaker Dollar. So far this market is holding on to its $1072 to $1043.70 range. A break through the downside support is likely to trigger an acceleration to $1028.80. A cutback in stimulus spending by China is likely to be a bearish factor affecting gold.

Speculators appear to be bailing out of crude oil because of weaker equity prices and the stronger Dollar. If traders can hold December Crude Oil under $80.00 per barrel then look for a possible break to $73.00 over the short-run. The fundamentals indicate an over supply of crude.

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