After a strong surge early in the trading session buoyed by better than expected earnings from Apple Computer after the close yesterday, U.S. equity markets ran out of buyers and broke into the close.
Technically all three equity markets look top heavy and poised to make a sizeable correction. Fundamentally, traders are concerned that the better than expected earnings are being caused by corporations cutting expenses rather than increasing revenues.
Tomorrow’s Initial Claims Report should set the tone for the day. Investors will be watching to see if there was another increase in job loss claims. An increase in claims will be a sign the economy is still weakening and that consumers would most likely continue to tighten up on their spending.
Treasury markets erased most of the gains from yesterday. Yields fell yesterday after Fed Chairman Bernanke said the Fed had tools to fight inflation once it decided to begin raising interest rates. Today traders realized that the Fed is still a long way from hiking rates and that increased supply from the Treasury will most likely drive up rates over the short-term.
Despite talk from the Fed Chairman that inflation will be under control once the Fed’s exit strategy is implemented, August Gold was able to hold on to its gains all day. In fact this market is up strong for the week and in a position to rally further. The strong close over a 50% level at 948.50 puts this market in a position to challenge another retracement level at 958.70.
Improving weather conditions helped wheat farmers work the fields to harvest the old crop and also helped the new crop develop further. Both of these factors put downside pressure on December Wheat today. This market is trading as if traders are expecting a huge surge in ending stocks when the USDA reports supply and demand in early August.
