A fresh round of M&A activity sent equity prices surging to the upside early in the trading session. This up move was different than other recent rallies that were triggered by investor demand for higher risk assets. Technically, oversold conditions attracted traders seeking value. The rallied fizzled late in the trading session which gave it an appearance of a short-covering rally. This could have been caused by shorts getting trapped on the wrong side looking for a continuation of last week’s sell-off. Investors are also still concerned that earnings expectations are not likely to match up with current lofty price levels.
December Treasury Bonds closed higher as demand for bonds continued to increase. Despite the low yields, traders are expressing their concerns about the possibility of a stock market correction by seeking the safety of the bond market. The chart indicates that 123-00 is a reasonable upside target.
The U.S. Dollar traded mixed on Monday. The Dollar gained ground versus the European markets like the Swiss Franc, Euro and British Pound, but lost a little versus the Asian-Pacific markets. The December Japanese Yen started strong but ended up posting a closing price reversal top. This could indicate the start of a short-term correction.
December Gold failed to maintain early upside momentum and faded to the downside late in the day. The choppy nature of the Dollar helped to generate indecision with the gold traders. The chart indicates a move to $976.00 is likely before attracting buyers. $1005 is strong resistance.
Firm equity markets and oversold conditions helped fuel a small short-covering rally in the December Crude Oil market. Inventories are still bearish because of high supply and low demand. Continue to look for more downside potential unless this contract regains $70.00.
