S&P 500 (Sep 10) INTRADAY
Review U.S. stocks rose, adding to the biggest rally in the Standard & Poor’s 500 Index since July, and Treasuries fell as an unexpected jump in home sales and a drop in jobless claims tempered concern the eco-nomic rebound is weakening. The S&P 500 climbed 0.8 percent to 1,090.00 at 4:30 p.m. in New York, bringing its two-day gain to 3.6 percent, the most since July 8.
Strategy Looking ahead we are expecting a consolidation of the recent uptrend ahead of today’s employment data. Market consen-sus for non-farm payrolls is -105,000. We have a more bullish fore-cast of -75,000 after a better than expected increase in the ISM em-ployment component and a moderate drop in continuing jobless claims that may lead to a private job creation of 45,000 in August. However, a decrease of 100,000 in temporary workers who helped in conducting the U.S. population count in conjunction with a 20,000 decline in state and local governments jobs, may push the headline down to -75,000 for August. We think today’s payrolls will dictate the market direction and investors may wait until the data release before heavily increasing their exposure to risky assets. We are looking at 1,100 as a first target if today’s data will be better than expected.
Alternative Scenario Weak non-farm payrolls may lead a retracement of some of the recent gains and a move back below S1 at 1080.75 with Monday’s high at 1072.75 as a first target.
EUR/USD INTRADAY
Review The dollar fell against most of its major counterparts after pending U.S. home sales unexpectedly rose, signalling the housing market may start to stabilize and boosting investor appetite for higher-yielding assets. The euro was near its strongest level in two weeks versus the dollar after European Central Bank President Jean-Claude Trichet said a double-dip recession is “not in the cards.” Speaking after the ECB left its benchmark rate at 1 percent, he said risks to the inflation outlook are “on the upside.” The euro was little changed at $1.2824, compared with $1.2809 on Wednesday, when it rose to $1.2856.
Strategy Looking ahead we are expecting a consolidation of the recent uptrend after positive Eurozone service PMI. We think there is a strong appetite for riskier currencies such as the euro that is negatively affecting the dollar at the moment. Also, today’s non-farm payrolls should be closely watched as it may dictate the mar-ket direction for the next days. We may see a continued appetite for riskier currencies if today’s data will be better than expected, leading the euro above 1.2900.
Alternative Scenario Weak non-farm payrolls could lead to a break-out of S2 at 1.2742 opening the way for a more aggressive move to Tuesday’s low at 1.2625.
Crude Oil (Oct 10) INTRADAY
Review Crude oil rose after a platform owned by Mariner Energy Inc. in the Gulf of Mexico was struck by an explosion, bolstering concern that regulations will reduce output in the region. Oil rebounded after the U.S. Coast Guard reported the blast, which occurred 90 miles off the Louisiana coast. The Obama admin-istration instituted a temporary moratorium on deep- water oil and gas drilling in the Gulf on May 27 in reac-tion to a BP Plc oil spill, the worst in U.S. history. Crude oil for October delivery rose 1.5 percent, to $75.00 a barrel at the 2:30 p.m. in New York.
Strategy Looking ahead we are expecting a consolidation of the recent uptrend as concerns about a potential restriction in off-shore oil and gas drilling may be partially off-set by concerns about the recent increase in oil inventories. We think the correlation between oil and equities is pretty strong at the moment and today’s non-farm payrolls should be closely watched in order to get a better direction.
Alternative Scenario Weak U.S. payrolls may lead a retrace-ment of some of the recent gains and a move back below S1 at $73.70 with yesterday’s low at 73.10 as a first target.
