While S&P 500 and Dow traders were keeping it tight, the September E-mini NASDAQ continued to soar to the upside Today’s action took this market to a new high this year and the close on the high set it up for further gains next week.
Comments from a banking analyst set off the equity markets earlier this week, but it was better than expected earnings from Goldman Sachs, Intel Corp., JP Morgan, Bank of America and Citigroup which helped accelerate the rally to the upside.
Despite the gains on the weekly chart, some equity traders feel the stock market is too far ahead of the economy and that the rally will not last. Others feel that the current rally is a set-up to attract fresh money into the market. These traders believe that some investors may chase new highs in the market after feeling they missed the bottom once again only to be met with a wall of resistance and renewed selling pressure.
The strong rally in equities helped put downside pressure on the September Treasury Bonds and Notes throughout the week as traders allocated funds between virtually no yield and higher yield assets. The September Treasury Bonds stopped at a 50% retracement level of the entire March to June break at 121-02. This was a normal move during a bear market and the subsequent break has this market set up for an even further decline.
August Gold finished the day slightly better but it was the weekly movement that was impressive. Fueled by the weakness in the U.S. Dollar and oversold conditions, this market regained minor support at 929.80 and is now in a position to retrace the entire 992.10 - 904.80 break to 948.40. This test will be important to the short-term structure of this market. If this rally fails at 948.40 then look for the start of another break.
September Crude Oil finished the week higher following a successful test of a 50% level at 59.30. Based on the short-term range of 74.66 to 59.30, look for a rally to 66.98 to 68.79 before new sellers are likely to step up. Fundamentally, this current short-covering rally was triggered by a weaker Dollar and the thought that an economic recovery would trigger demand for energy.
November Soybeans fought off several attempts to drive this market sharply lower but managed to close up for the week. The charts indicate that 8.80 is the line in the sand for the bulls. It is going to take a combination of short-covering and fresh buying to ignite a retracement to 9.90. Besides being technically oversold, speculators are willing to bet that cool weather across the Midwest this week-end may slow down the soybean crop’s progress.
