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U.S. Equity Traders Jump on Cheaper Stocks

James Hyerczyk from ForexHound.com at 11/27/09


U.S. equity traders jumped on the opportunity to buy cheaper stocks following the dramatic sell-off in the market. Equity markets were driven lower by debt problems with Dubai World. This large corporation allegedly asked for a $59 billion debt repayment postponement until May 2010. This announcement set shockwaves through commodity and equity markets as investors pared position and sought safety in the U.S. Dollar.

Investors traded the markets in an orderly fashion once the U.S. stock markets opened. Traders bought up lower priced stocks from the opening with the December E-mini S&P 500 rising from 1077.75 to 1098.25. So far the break from the recent high amounts to only a retracement of the 1026.00 to 1112.25 range. This retracement zone is 1069.00 to 1059.00. The low the past two days was 1067.00.

December Treasury Bonds are paring gains after a strong surge to the upside. This morning’s rally was triggered by a flight to safety rally into U.S. Treasury markets. Look for the direction of the stock market to control the movement and direction of the U.S. debt market.

The U.S. Dollar is giving back much of its gain from the past two days. When the Dubai debt crisis began to erode, global investors cut positions in riskier assets while seeking the safety of the Dollar. Commodity-linked currency markets such as the Canadian Dollar, Australian Dollar and New Zealand Dollar faced aggressive selling pressure. The British Pound was down substantially as news leaked that a U.K. bank had tremendous exposure to the Middle-East. Traders should watch the Euro into the close. A weekly closing price reversal top will be produced if the Euro finishes less than 1.4861.

February Gold is bouncing back after a sharp sell-off. The stronger Dollar triggered a break in the precious metals complex. This move was accelerated when global traders began dumping dollar-based assets. A close under $1166.20 will form a weekly reversal top. A follow-through to the downside next week will be a sign that a short-term top is being formed.

March Crude Oil traded sharply lower. Lower equity prices and a higher Dollar helped provide the downside pressure. Based on the main range of 67.46 to 83.60, a retracement zone has been formed at 75.53 to 73.63. Today’s low stopped slightly below the 50% price at 74.88. The current rally from this bottom could falter inside 79.24 to 80.27.

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