Without any fresh economic data this morning, the U.S. equity markets are holding on to the overnight gains but trading range bound. Most of today’s gains can be attributed to the overnight strength in the Asian and European equity market. These two markets basically played catch up with the U.S. markets in reaction to the bullish comments from Fed Chairman Bernanke on Friday.
The recent strength in the equity markets has been attributed to money managers chasing the market out of fear they will miss the rally and underperform the benchmark index. Skepticism is building that this rally may not be able to maintain its current pace because traders seem to be reacting to the positive news and ignoring the negative news. Examples of this include rallying because existing home sales increased while ignoring the fact that inventories also increased. In addition, forecasts of more bank failures continue to be ignored. While not trying to predict a top, there will be a point at which the buying dries up.
September Treasury Bonds and Notes are brushing aside this week’s $109 billion auction and the strength in the stock market and rallying this morning. Early in the session the pressure was to the downside, but since then these two markets have been climbing steadily. There are warning signals out that China may not be that interested in Treasuries this time around. These same rumors were present two weeks ago at the last auction, but nonetheless China came through at the very end of the auction.
The foreign currency markets are looking for direction today. Despite the lackluster trade, however, there is a friendly bias toward the Dollar. Traders do not seem to know whether to sell the Dollar because of increased appetite for risky assets or buy the Dollar out of confidence that the U.S. economy will lead the world out of the recession.
December Gold is trading sideways to lower because of the inaction in the currency markets. A weaker Dollar will send gold prices higher while the lack of inflationary news is likely to keep a lid on any gains. Traders are also confused about what to do with industrial metals. September Copper could rise if China renews its interest in the metal and economic expansion leads to greater demand. Industrial metals could also fall if new economic policies in China end up curbing demand for the metal. Longs could begin liquidating if clarity isn’t provided soon.
December Crude Oil is trading firmer at the midsession in light trading. The strength in the stock market seems to be holding this market higher. Last week’s rally because of a drop in inventories may have been a case of too much too soon as traders don’t seem to be aggressive buyers at current levels. Traders could be waiting on the sidelines until this week’s inventory report on Wednesday gives them some direction.
The recent strength in the equity markets has been attributed to money managers chasing the market out of fear they will miss the rally and underperform the benchmark index. Skepticism is building that this rally may not be able to maintain its current pace because traders seem to be reacting to the positive news and ignoring the negative news. Examples of this include rallying because existing home sales increased while ignoring the fact that inventories also increased. In addition, forecasts of more bank failures continue to be ignored. While not trying to predict a top, there will be a point at which the buying dries up.
September Treasury Bonds and Notes are brushing aside this week’s $109 billion auction and the strength in the stock market and rallying this morning. Early in the session the pressure was to the downside, but since then these two markets have been climbing steadily. There are warning signals out that China may not be that interested in Treasuries this time around. These same rumors were present two weeks ago at the last auction, but nonetheless China came through at the very end of the auction.
The foreign currency markets are looking for direction today. Despite the lackluster trade, however, there is a friendly bias toward the Dollar. Traders do not seem to know whether to sell the Dollar because of increased appetite for risky assets or buy the Dollar out of confidence that the U.S. economy will lead the world out of the recession.
December Gold is trading sideways to lower because of the inaction in the currency markets. A weaker Dollar will send gold prices higher while the lack of inflationary news is likely to keep a lid on any gains. Traders are also confused about what to do with industrial metals. September Copper could rise if China renews its interest in the metal and economic expansion leads to greater demand. Industrial metals could also fall if new economic policies in China end up curbing demand for the metal. Longs could begin liquidating if clarity isn’t provided soon.
December Crude Oil is trading firmer at the midsession in light trading. The strength in the stock market seems to be holding this market higher. Last week’s rally because of a drop in inventories may have been a case of too much too soon as traders don’t seem to be aggressive buyers at current levels. Traders could be waiting on the sidelines until this week’s inventory report on Wednesday gives them some direction.
