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Traders Drive Up Equity Futures in Anticipation of Upbeat Earnings

James Hyerczyk from ForexHound.com at 10/19/09


Traders expecting upbeat earnings reports this week are helping to drive up stock index futures this morning.  Investors seem to be optimistic that the positive earnings trend will continue.  Technical indicators continue to signal overbought conditions, but investors seem to be ignoring these indicators because they really have no investment alternative other than equity markets at this time. At this point, it is going to take a slew of poor earnings reports to drive investors out of this market. 


December Treasury Bonds and Treasury Notes are feeling downside pressure this morning as money is flowing out of the lower yielding Treasury instruments into higher risk commodities and equities.  Look for pressure to mount on the Treasuries as investors begin to demand higher yields to compete with the movement in the equity markets.


Downside pressure is on the U.S. Dollar this morning.   Trader appetite for risk is driving traders into the December Euro and commodity based currencies such as the December Canadian Dollar.  The December Japanese Yen is seeing small gains this morning as once again traders are treating the U.S. Dollar as a funding currency.  The December British Pound is the lone loser this morning.  Last week, a shift in sentiment sent the British Pound higher, but this week traders will face the reality of reports from the Bank of England and the third quarter GDP report.  Speculators are also selling as news is breaking that the BoE may actually be considering extending its asset buyback program instead of ending it like traders were speculating last week.


December Gold is up because of the weaker Dollar.  The market is currently retracing last week’s decline.  Although the charts indicate the possibility of a correction to $1028.80, buyers have been coming in just slightly below $1050.00.  Last week, gold started to show signs of diverging from the Dollar.  This morning’s action looks as if the relationship is going back to normal.


The weaker Dollar and decreases in supply have been helping to give crude oil a boost.  Upside momentum may begin to pick up now that December Crude Oil has cleared the $75.00 barrier.  This price should now become support.  $80 crude oil is now the next upside target.  Look for volatility to pick up as this market moves higher.  Speculators continue to support the current rise in anticipation of greater demand as the global economy recovers.


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