Demand for Higher Risk Assets Drives S&P through Recent High

James Hyerczyk from ForexHound.com at 01/04/10

 

Renewed demand for higher risk assets helped to drive the March E-mini S&P 500 through the December high at 1126.50. A better than expected U.S. Manufacturing report helped to underpin the U.S. markets and create upside momentum.

A surge in demand for higher yielding assets is also helping to drive crude oil and gold prices higher. A firm undertone has been present throughout the day at the expense of the Dollar.

The strong rally in February Gold turned the main trend to up on the daily chart on the move through $1114.50. The daily chart indicates this market is poised to rally another $30 back to a retracement zone at $1151.30 to $1169.30.

The news of a better than expected surge in Chinese manufacturing is helping to trigger a breakout to the upside in March Crude Oil. Traders are expected to see increased demand for energy. In addition, cold weather in the U.S. has led to a pick-up in demand for heating oil and natural gas. The last main top at 81.52 was broken overnight, setting the stage for a test of the October top at 83.60.

A friendly U.S. Manufacturing report is helping to weaken the Dollar at the mid-session by driving up demand for higher yielding assets.

The Dollar opened the first trading session slightly better but a strong surge in U.K. and China manufacturing data helped to pressure the Dollar overnight. These two better than expected reports triggered renewed interest in demand for higher risk assets.

The daily chart pattern in the March Euro suggests the first upside objective over the short-term remains 1.4680 to 1.4790. Whether traders go after this level will be determined by a slew of U.S. economic reports this week especially the employment report on January 8th.