Stock Indices Fail to Hold onto Gains

James Hyerczyk from ForexHound.com at 12/02/09

 

This morning’s ADP Report showed a greater than expected job loss in November, but the report was revised for the better in October. Pre-market estimates were for a job loss of 150,000. The actual reported loss was 169,000. The number of jobs lost in October actually improved from 203,000 to 195,000. If anything, this report shows that the pace of job losses is slowing.

Later this afternoon, trader focus will shift to the Fed’s Beige Book. This report is not expected to reveal anything new about the economy and should confirm a rough recovery. The report should back the Fed’s decision to keep interest rates low for a prolonged period of time.

The December E-mini S&P finally broke through the November top at 1112.25, triggering stops all the way to 1115.50. Expectations were for buyers to drive this market all the way to a major 50% retracement price at 1122.00. This was not to be, however, as aggressive buyers failed to materialize. This confirms that buying strength is dangerous at current levels. A break under 1102.25 late in the day will be a sign of weakness. Traders should also watch for a lower close to signal a closing price reversal top and the start of a possible 2 to 3 day break.

Weaker equity markets are giving the lower yielding March Treasury Bonds a boost this morning. The chart pattern indicates key support at 121’06. This price held last night as support. Look for a possible rally back to 122’02 to 122’09 over the short-run if equity markets begin to sell-off hard.

For a second consecutive day, the Japanese Yen is under pressure after a Bank of Japan official expressed his concern about the rise in the currency. The Dollar Index is trading higher and actually gaining strength. Last week’s low at 74.27 is still holding. A break through this level is likely to trigger a further decline to the April 2008 bottom at 73.67.

The December Euro is trading lower after failing to overtake $1.51. The break so far is still holding $1.50, where traders are trying to establish a new support base. Traders are flatting positions ahead of tomorrow’s European Central Bank meeting.

The December British Pound overtook a key retracement level at 1.6646 last night but failed to hold on to earlier gains. New support has been established at 1.6575.

The December Swiss Franc is trading weaker today and has fallen back below par with the Dollar. Overbought conditions and the possibility of an intervention may be encouraging additional selling pressure.

Weaker equity markets and a lower crude oil market are helping to pressure the December Canadian Dollar.
February Gold continues to hold onto earlier gains but has not exceeded the 1218.40 top formed during the night trading session. A break back under 1208.40 could send this market sharply lower by the end of the day.

This morning’s EIA report indicated that oil inventories had risen more than expected. This negative news confirms yesterday’s bearish American Petroleum Institute Report which showed that inventories rose 2.9 million barrels. March Crude Oil is trading lower on the news at the mid-session. Lower equity prices and a firmer Dollar are helping to pressure prices lower at the mid-session.