S&P 500 (Sep 10) INTRADAY
Review U.S. equities pared earlier gains as the Fed minutes disappointed investors speculating the central bank would resume “quantitative easing,” or the purchase of debt to safeguard the economic recovery. Ten-year Treasuries extended their advance as the minutes showed some Fed officials saw “increased downside risks” to economic growth and inflation. The S&P 500 closed at 1,052.50, reducing its August slide to 4.3%.
Strategy Looking ahead we are expecting a continuation of the longer term trend lower based on continued negative market senti-ment and weak U.S. macroeconomic data. We are expecting a pull back in the ISM manufacturing index after disappointing Chicago PMI and weak Empire and Philadelphia Fed surveys. Also, today’s ADP employment should be closely watched ahead of Friday’s non-farm payrolls. If the data disappoints, this morning’s move higher can provide a suitable entry short at 1064.75, although any downside can be limited by a stronger EUR/USD. We think the situation is extremely vulnerable at the moment and this week’s data may dic-tate the market direction for the next few weeks.
Alternative Scenario Strong economic data may lead a retracement of some of the recent sell off and a move back above Monday’s high at 1072.75 with the 38.20% Fib at 1082.50 as a first target.
EUR/USD INTRADAY
Review Europe’s shared currency advanced against the greenback after data showed bigger-than- forecast gains in U.S. home prices and confidence, easing concern the economy is slowing and pushing up U.S. stocks. It pared back some gains after the minutes of the Fed’s Aug. 10 policy meeting disappointed inves-tors speculating the central bank would resume “quantitative easing,” or the large- scale purchase of debt, to bolster the economy. The euro was at 1.2664 at 4:30 p.m. in New York
Strategy Looking ahead we are expecting a continuation of yes-terday’s uptrend mainly due to a weak dollar rather than a strong euro. We think the Eurozone is in a slightly better shape compared to the U.S. economy at the moment and this may favour the euro against the dollar in the near term. Also, today’s ISM manufactur-ing and ADP employment should be closely watched in order to get a better direction for the dollar and assess the current U.S. macro-economic situation.
Alternative Scenario Negative Euro zone fundamental news flow could lead to a break-out of yester-day’s low at 1.2625 opening the way for a more aggressive move to S3 at 1.2500.
Crude Oil (Oct 10) INTRADAY
Review Oil dropped the most in 12 weeks as business activity in the U.S. expanded in August at the slow-est rate this year. Oil for October delivery fell $2.78, or 3.7 percent, to $71.92 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Earlier, it lost 4.2 percent, the biggest drop since June 4. Prices have tumbled 8.9 percent this past month.
Strategy Looking ahead we are expecting a continuation of the recent downtrend as bearish oil and distillate inventories and disap-pointing U.S. macroeconomic data that may continue to curb de-mand in the world’s largest energy consumer. Our short-term view for oil is bearish as a very weak stock market in conjunction with an increase in oil and distillate inventories may add some pressure to the oil price. Also, a weak ISM manufacturing may add some pressure to oil and push the crude price through our first target at $71.52.
Alternative Scenario Strong economic data may lead a retracement of some of the recent sell off and a move back above the previous resistance at $74.00 with yesterday’s high at 74.75 as a first target.
