U.S. equity markets are trading flat to better at the mid-session. Today’s strength is a bit of a surprise because of the weakness in the higher risk currencies. Usually this type of action indicates late session downside pressure is likely if investors decide to seek protection by in lower yielding assets. Yesterday the markets showed how resilient they were when they rebounded from early pressure. Risk of a flare-up of financial problems in Greece could encourage investors to move money out of higher yielding stocks and commodities.
There is a small divergence building which could prove to be a negative influence on stocks. Today the June E-mini Dow penetrated the recent top at 10757 while the June E-mini failed to reach last week’s top. The June E-mini NASDAQ also failed to penetrate yesterday’s high at 1052.75.
June Treasury Bonds are trading flat at the mid-session in light trading. Investors seem unwilling to take a position until they see this week’s auction results. Investors fear that the higher return in the equity markets will encourage traders to seek higher yields in T-Bonds, thereby driving down prices. Furthermore, some traders feel that the war of words between the U.S. Treasury and China over currency valuation will lead to less demand from the Chinese.
The stronger Dollar is putting pressure on April Gold at the mid-session. On Monday the main trend turned to down on the daily chart, signaling weaker markets to follow. Today’s action could be short-covering because of oversold conditions or fresh buyers looking for a collapse in the Euro. Watch for choppy, two-sided trading while the Dollar tries to establish a trend. A break through $1088.50 could trigger an acceleration to the downside.
June Crude Oil is trading better despite the strength in gold and equities. Pressure on equities and commodities late in the session could lead to weakness in June Crude Oil. Monday’s sharp rise in equities triggered a short-covering rally in crude oil after this market changed the trend to down after a break through 79.77. This market will remain in a position to break as long as the two tops at 83.70 and 83.80 remain intact.
The Greenback is trading mixed at the mid-session. The Euro and the British Pound are the two weakest currencies, down .29% and .37% respectively. The Dollar is trading better versus commodity-linked currencies.
The March Euro is trading lower at the mid-session as speculation continues to grow that Greece Prime Minister Papadreou is likely to leave this week’s European Union summit on March 25th and 26th without a financial aid deal. This means Greece will turn to the International Monetary Fund for aid if needed. This is negative to the Euro because it makes Europe appear weak for allowing one of its members to go out of the EU to seek financial help. Even if Greece gets the money it doesn’t mean instant success for the Euro.
