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Stock Market Range Bound on Light Volume

James Hyerczyk from ForexHound.com at 12/10/09


U.S. stock indices traded higher but stalled shortly after the opening. The strong price surge was muted when U.S. investors failed to chase stocks higher.

Stronger global equity markets contributed to the weakness in the Dollar early in the trading session as traders once again increased demand for more risky assets after reassessing U.S. economic data and the odds of an interest rate increase by the Federal Reserve.

This morning, traders drove equities higher after taking a look at the U.S. employment situation for the first time following last week’s surprise drop in the unemployment rate.

Stronger demand for equities is supporting the December E-mini S&P at the mid-session in tight range bound trading on light volume. Traders seem to have shrugged aside debt concerns in Dubai, Greece and Spain while renewing their interest in higher yielding assets. Yesterday’s closing price reversal bottom at 1085.00 was confirmed on this morning’s move through 1097.00, but the rally stopped at the Fib retracement price at 1106.00.

Renewed interest in higher yielding assets is pushing March Treasury Bonds and Notes lower. March Bonds are at a critical juncture. Currently this market is on the bearside of both a .618 level at 118’31 and an uptrending Gann angle at 118’28. Look for pressure as long as this market remains under theses levels.

February Gold is trading better because of oversold conditions. This market has fallen sharply off its high, however, because of the strengthening Dollar. The key downside target remains $1107.40, but intraday trading action indicates this market may not reach this level, if the Dollar weakens. The first upside target today remains $1147.50. This downtrendng Gann angle is controlling the short-term direction of this market.

March Crude Oil has completed a .618 correction of the 67.46 to 83.60 range but the expected technical bounce to the upside did not materialize. A weaker Dollar and firmer equity prices could help fuel a short-covering rally into the close. Gains could be limited because of bearish supply and demand conditions.

The U.S. Dollar is gaining strength against most major currencies at the midsession with the exception of the Pacific Rim countries.

Stronger global equity markets contributed to the earlier weakness in the Dollar as traders once again increased demand for more risky assets after reassessing U.S. economic data and the odds of an interest rate increase by the Federal Reserve. The inability to rally the stock market after an early morning surge helped the Dollar turn positive.

The December Swiss Franc is trading sideways-to-lower following the Swiss National Bank monetary policy decision. The SNB left its 3-month target rate unchanged while announcing plans to stop bond purchases.

Stronger equity markets and a bearish economic report are helping pressure the Japanese Yen The drop in core machinery orders in October is fueling speculation that deflation will undermine the economic recovery.

The December Euro has erased all of its earlier gains after traders became more risk averse due to the lack of follow-through to the upside in the stock market. The Euro is clearly taking its direction from the stock market. Today’s action is taking place on light volume.

The December British Pound moved lower shortly before the mid-session as demand for higher yielding currencies stalled. This morning the Bank of England left interest rates unchanged while voting to maintain its asset-purchase program.

The December Canadian Dollar is down slightly but remains rangebound between a pair of 50% levels. A weaker stock market late in the trading session could help the U.S. Dollar gain on its Canadian counterpart.

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