Equity futures edged slightly better after trading most of the day lower and at the mid-point of the day-session charts. Traders tried to rally the indices early after a better than expected New Home Sales Report sent the Dow and S&P 500 futures to a new move high, but the failure by the NASDAQ to follow-through to the upside discouraged traders from buying at such lofty levels. Late in the trading session, the markets turned bullish when the indices held 50% of the day and the day session opening.
The friendly housing news was another sign that the economy may be turning upward, however, after a two-week rally, investors may begin focusing on value rather than the economy. This may mean that traders will be more selective about where they enter. Some traders may even use another rally as an excuse to take profits because prices have appreciated so much. Today’s rallies looked labored so do not be surprised by the start of a sizeable correction some time this week.
Financial futures markets closed lower. The early weakness in the stock market did not attract enough selling conviction to send money to the Treasuries. T-Bond and T-Note traders seemed content with keeping pressure on the downside while this week’s Treasury auction was taking place. An increase in supply usually attracts selling pressure unless acted upon by a surprise force. Today there were no surprises so the Treasuries remained under pressure throughout the day.
With the exception of the September Japanese Yen, foreign currency futures remained firm throughout the day. Most markets opened higher but some of the gains were erased after equity futures sold off early in the session. After stocks recovered into the close, currencies firmed up. Although the currency markets have been hesitant at the June highs, upside momentum seems to be building as traders have regained confidence in the potential for a global economic recovery.
August Gold futures traded slightly better on Monday. Demand for precious metals has been firm lately as traders take protection against the possibility of inflation. The weaker Dollar has also contributed to the strength in gold and silver. Signs of an economic recovery are also boosting demand for industrial metals such as platinum and copper.
Two-sided trading dominated the energy markets. Crude oil opened up strong but sold off early when the equity markets broke. The late session rally in stocks occurred too late to drive crude higher so the market had to settle only slightly better. Signs that the global economy may be improving is helping to support crude oil at these current levels. Excess supply in gasoline and heating oil seemed to be ignored by traders today who instead decided to focus on the news that refineries may be cutting back on production.
November soybeans finished lower but within its two week range. Traders are trying to figure out what impact China’s planned auction will have on future demand. December Wheat and December Corn closed higher due to technically oversold conditions. Ideal weather is still helping the crop to improve.
Profit-takers hit the September Cocoa. After a short-term break, look for a buying opportunity because production issues are expected to have a long-term effect on the crop. October Sugar maintained its upside momentum driven by low production and increased demand.
