Thursday, June 25, 2009

Overseas Markets Regain Support Levels, Europe Stumbles, Will Wall Street?

(As of approximately 2:00pm GMT Thursday, 10:00 am EST)


Despite mixed news on Wednesday, world stock indexes and commodities continued to erase the Monday's losses, and along with currencies have returned to their multi-week trading ranges prior to this June 22nd worldwide selloff.

As we've noted earlier, the continuing lack of overall positive news that might suggest that employment, earnings, GDP, or any other significant economic measure is likely to improve within the coming year as much as stock prices have already increased, it remains to be seen if world markets can continue to stabilize and improve.


Reflecting the return to recent trading ranges in other markets, major currency pairs have returned to pre-Monday trading ranges along with stocks and commodities, providing chances for traders to open positions near support or resistance as currency pairs test the lower and upper price ranges.

The dollar against the Euro and Yen, helped by a surprising surge in May Durable Goods Orders, suggesting growing production, and supportive words from the Minutes from the concluded Federal Reserve Open Market Committee, which included:

No change (i.e. increase in planned monetary or debt expansion) in current stimulus programs
A modestly upgraded outlook for the U.S. economy

World Stock Indexes

After Monday's drop, the daily charts for Tuesday on the S&P and most other world stock indices showed cross shaped candlesticks called Doji Stars, which typically indicate uncertainty (since prices fluctuate but end the day unchanged, like someone failing to make up their mind about which way to go) and a possible change in direction.

For the third straight time this month, these candlesticks correctly forecasted a direction change, this time to the up side. Asian markets showed solid gains in the early hours (GMT) of Wednesday, Europe generally followed through with more modest gains, and the U.S. markets rose strongly. The major Asian stock indexes opened Thursday's trading with a repeat of impressive 1%-2%+ gains, but Major European indices are down as Euro zone industrial orders dropped by over 33%, a record decline, indicating falling demand for capital and intermediate goods. In response, S&P futures point to a mildly negative opening of U.S. markets

It is interesting to note that this disappointing news from European industry stands in stark contrast to Wednesday's strong durable goods orders increase in the U.S. The European central bank has been more restrained in its stimulus programs than its American counterpart, the U.S. Federal Reserve. Could these results begin to suggest which approach has been correct?


Declines in both pessimism and the USD helped Crude and Gold get back over recent support levels of around $68 and $923 respectively. Further short term moves will depend on news. Both have been trading within tight ranges just above prior weeks' support.

Breaking News to Know

Yen Weaker Against USD as Fed Indicates Improving American Economy

Short Selling of S&P Rises for First Time Since March. Do Short Sellers See a Near Term Drop Coming? Health care companies were among the biggest targets of short sellers as Obama's proposed health care industry reform is widely viewed as a threat to profits.

The final reading for first quarter of U.S. GDP came in with a 5.5% annualized decline, which is a slight improvement from the 5.7% annualized decline that was previously reported and also below the 5.7% decline that was widely expected. Personal consumption for the first quarter was revised modestly lower to reflect a 1.4% increase. Initial jobless claims for the week ending June 20 totaled 627,000, which is above the 600,000 claims that were expected. Initial claims in the prior week were revised upward

Coming News to Watch

S&P futures vs fair value: -5.00. Nasdaq futures vs fair value: -8.00. In overseas trading, European stocks are grappling with selling pressure

Economic Calendar (All times GMT, order of figures from left to right: Actual-Forecasted-Prior)

Today's major economic calendar includes data coming out includes:

1:30pm USD Unemployment Claims ? 605K 608K
3:00pm USD Fed Chairman Bernanke Testifies
11:45pm NZD GDP q/q ? -0.7% -0.9%

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