Stock index futures came back late in the trading session to challenge the highs of the day following a mid-morning sell-off which was triggered by a worse than expected economic report.

 

With equities already showing signs of topping out because of overbought conditions, stock index futures sold off sharply following a bearish consumer confidence report.  Both the September S&P 500 and September Dow took out the previous day’s low but the markets stabilized when the September NASDAQ failed to follow-through to the downside. 

 

The NASDAQ regained its leadership role about midday following the release of the results of today’s 2-year Treasury Note auction.  The results were less than stellar and yields actually increased.  This news erased all of the gains in the Treasury futures and sent money flowing back into the equities.  The late session buying spree helped the NASDAQ rally to a new move high while the S&P 500 and Dow lagged behind.

 

While it did not look like the typical rally which has been taking place almost daily since the bottom on July 8th, it was a strong sign that the market was still in strong hands.

 

The stock market may not be ready to give up gains, but the September Euro showed that it may be topping out because of less demand for risky assets.  Following an early attempt to break out through the June top at 1.4327, the Euro posted a daily reversal down which could lead to a corrective break over the short-run.

 

The strong comeback in the Dollar throughout the day put heavy selling pressure on the December Gold contract.  Following a 50% correction to the upside that began on July 8th, this market broke almost 50% of the recent rally in only 2 days.  Short-term this market may be oversold, but indications are that a test of 928.70 is likely.

 

September Coffee fell short of resistance at 126.90 before sellers arrived.  The weaker Dollar encouraged selling pressure as traders thought this would curtail demand.  The next downside target is 119.80 to 118.30.  A test of this zone may attract buyers especially if the Dollar weakens.

 

September Crude Oil closed below a key 50% retracement area at 66.98 indicating more downside pressure could be expected.  The charts indicate the next downside target is 64.15 to 63.00.  A stronger Dollar and weaker equities could help accelerate the break.