U.S. stock index futures gapped higher following a strong surge to the upside in Europe and Asia and rallied even further as U.S. Weekly Initial Claims improved for the third week.  Buying, however, dried up as the September E-mini S&P 500 neared psychological resistance at 1000 and traders expressed concerns about today’s Treasury auction. 

 

Although the S&P tried to mount a rally late in the session after holding 50% of the day’s range throughout the day, the attempt failed to draw any attention as it neared the high, and the market collapsed to a new low for the day into the close. 

 

Afterwards Disney announced disappointing earnings which could be the catalyst for a sell-off tomorrow.

 

September Treasury Bonds closed higher following the release of better than expected auction results.  Today’s auction of seven-year Treasury Notes attracted more demand than previous lower-term note auctions earlier in the week.  This helped lower yields while boosting the price of both 30 year bonds and 10 year notes.  The chart suggests that the September Treasury Bonds may be forming a weekly reversal bottom which could be a sign of a stock market top.

 

December Gold gained ground as the Dollar weakened.  Technically this market found support at a key 50% price level, but it was the weakness in the Dollar which triggered the rally.  News that China’s central bank was not going to implement strict credit requirements helped September Copper regain all of its loss from yesterday.  The strong close put this market in a position to take out the previous high for the week at 2.5790.

 

The strong surge in equity markets helped September Crude Oil erase all of its losses from yesterday.  Tomorrow will be a key day as a follow-through rally will be necessary to judge whether the buying was real.  Yesterday’s large increase in weekly inventories should have been enough to keep the pressure on this market.  If higher equity markets are the driving force for this rally, then a sell-off in the equity markets could trigger another sell-off in the crude oil tomorrow.