The Futures Pattern, Price & Time Report

Jobs Data Drives T-Bonds Lower, but ISM Services Report Raises Concerns

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 07 Sep 2010 01:49:00 GMT

The key to today’s trading action will be whether investor appetite for riskier assets prevails, the first full trading day following Friday’s stronger-than-expected U.S. labor data. The December Treasury Bonds have had a tendency to break and equity markets rise when risk appetite is on the rise.

In case you were away last week, I wanted to give you a quick update on my personal thoughts from last Friday’s U.S. Non-Farm Payrolls Report.

The employment numbers mostly across-the-board came in better than expected, but I was particularly encouraged by two points. Initially, I was encouraged by the revisions for June and July. If you recall during those two time periods, there was a significant amount of concern that the U.S. economy could be headed for a double-dip recession. Friday’s positive revisions of those numbers should temper those fears for the time being.

At the same time, the revisions give credence to the Fed’s assessment of the economy. The Federal Reserve has been under pressure lately to use some of its monetary policy weapons to combat the threat of a double-dip recession. The Fed on the other hand has stated it will only act if there are “unexpected developments” which cause a significant worsening in the economic outlook.

The internals of last week’s jobs data also stood out for me as I assessed the August jobs data report. The fact that there was an increase in the average wage as well as the average work week was somewhat impressive. This suggests that although companies are not hiring on a broad based scale, they are getting very solid production from their current employees. And more important, they are compensating their current employees for that increase in production.

Although the better-than-expected U.S. jobs data report helped fuel the rally in stocks and the break in the Treasury markets, investors were handed a fresh reminder that there still are problems with the U.S. economy when the Institute for Supply Management said its U.S. services-sector index hit 51.5% in August, down from 54.3% in July. This report missed economist expectations of 53.5%.

Stocks gave back a little of their gains and December Treasury Bonds pared their losses on the ISM Services news.

Technically, despite the hard sell-off, the T-Bonds still show no sign of changing trend. What the current sell-off amounts to as of Friday is a clean 50% retracement of the 124’22 to 135’19 short-term range. The first target of 130’17 was exceeded when down side momentum drove the market into 130’12 before short-covering following the ISM Services report helped the market regain the 50% level. Should the low at 130’12 fail, then look for a further decline to 129’11.

Based on the sell-off from 135’19 to 130’12 and the trading action late Friday and during Monday’s electronic trading session, December Treasury Bonds may make an attempt to retrace back to 133’02 to 133’22. Bearish traders may try to form a secondary lower top in this range. If this pattern occurs, then look for the start of an even steeper sell-off over the near-term.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Investors Paring Long T-Bond/Short T-Note Positions

jhyerczyk@yahoo.com (James A. Hyerczyk) — Fri, 03 Sep 2010 13:24:00 GMT

In this morning’s employment report webinar, I made mention that going into the report the December T-Notes were in weaker position than the December T-Bonds. The reasoning behind this was that the Fed’s decision to buy Treasury Bonds meant that it was trying to keep longer-term yields lower than 10-year yields.

Traders are driving the T-Bonds lower today compared to the T-Notes because of speculation that the better than expected jobs data may mean the Fed may be less aggressive in its T-Bond purchases in the future.

In other words, based on recent Fed comments, they may have chosen to buy T-Bonds just to bide their time until the economy began to turnaround. Investors are paring back their Long T-Bonds/Short T-Notes spread position this morning in anticipation of the Fed slowing down or ending their T-Bond buying spree. This may be the main reason why T-Bonds are falling faster than T-Notes.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Private Sector Employment Key to Market Movement Today

jhyerczyk@yahoo.com (James A. Hyerczyk) — Fri, 03 Sep 2010 11:08:00 GMT

Let’s take a look at today’s U.S. Non-Farm Payrolls Report. The big picture still suggests we are in a jobless recovery. The focus of today’s report will be on the private sector. An anemic jobs number is likely to cause companies to continue to conserve cash and refrain from hiring.

One key factor that remains a major concern is the high level of the weekly jobless claims number.

Investors should remember not to focus too much on the labor rate. Some people think that 10% unemployment is a major psychological level. Remember that the jobs rate may be high because the labor force is decreasing. Some unemployed people are giving up on their job searches, leading to a decrease in the number of people actually looking for work.

Today’s estimate is for a loss of between 106k and 130K jobs. The mid-point is 118K. Briefing.com’s consensus is 120K. Bloomberg.com’s survey ranged from a decline of 12,000 to a 120,000 increase with a survey median of -105,000.

Needless to say the ranges are quite wide which means the emphasis will most likely be on the private sector number which is estimated to show an increase of 40,000. I believe that this is the number that will fuel the markets’ reaction.

Today’s NFP number should fuel a typical asset allocation move. A bullish number is likely to drive stocks higher, Treasurys lower and gold lower. A bearish number will not be good for stocks, lend support to the Treasuries and gold.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks Treading Water with Slight Biased to Upside

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 02 Sep 2010 18:47:00 GMT

U.S. equity markets are trading sideways to higher at the mid-session in a lackluster trade. Upside momentum has slowed compared to yesterday, but there doesn’t seem to be a strong conviction to the upside either.

Technically, the September E-mini S&P 500 has a chance to test a key Fibonacci retracement level at 1088.00.

December Treasury Bonds are trading lower. Today’s weakness is a combination of lack of conviction ahead of Friday’s job report and a tired market.

Technically, the T-Bonds are still under pressure because of the closing price reversal top at 135’19 on August 25. On the downside, this market still has a chance to test a key retracement zone at 130’17 to 129’11.

The U.S. Dollar is trading flat to lower at the mid-session as traders remain cautious ahead of Friday’s U.S. Non-Farm Payrolls Report. Earlier this morning the Dollar showed little reaction to the European Central Bank’s decision to hold interest rates steady and a slight drop in U.S. Weekly Initial Claims.

Jobless claims remained a concern among investors because they remain at a high level. This is an indication that the U.S. economy is cooling while fueling worries that the recovery may not be sustained if private firms continue to refrain from hiring new workers.

The September Euro is holding steady following the ECB’s decision to hold interest rates steady. The market had a positive reaction to the comment from ECB President Trichet who said the recovery “should proceed at a moderate pace”.

Mortgage issues are helping to put pressure on the September British Pound. A choppy stock market is leading to mixed results in the commodity-linked currencies. The New Zealand Dollar is trading better, but the Australian and Canadian Dollars are trading flat which may be a sign that Wednesday’s strong rallies may have been overdone.

Although the Dollar is down this week, many large traders and institutions have been on the sidelines due to tomorrow’s employment report and Monday’s U.S. Labor Day holiday leading to speculation that this week’s action was due to thin trading conditions.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Flat Euro May Straddle 1.2793 to 1.2754

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 02 Sep 2010 13:39:00 GMT

This morning the European Central Bank left interest rates unchanged as expected. ECB President helped move the Euro a little higher by stating that recent data has been stronger than expected partly due to temporary factors, but the ECB still expects the Euro Zone’s economic recovery to be moderate and uneven.

The Euro had a pretty uneventful night after Wednesday’s strong surge. The market is currently trading inside yesterday’s range with traders taking a cautious approach ahead of Friday’s U.S. Non-Farm Payrolls Report.

Should the Euro begin to weaken throughout the day, look for it to straddle a minor retracement zone at 1.2793 to 1.2754.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks Shrug Off Weekly Claims; Focus on Friday's Jobs Data

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 02 Sep 2010 13:36:00 GMT

New U.S. Weekly Jobless Claims declined last week according to the government, but were still too high to have a strong impact on the weak labor market.

The number was good enough to push Treasury yields slightly higher, driving down December Treasury Bonds. This market has been trading in a tight range for six days indicating impending volatility. On the downside, 130’17 to 129’11 remains a potential downside target. The top at 135’19 seems to be closely guarded at this time.

Equity indices are rising on the jobless claims news. It seems investors like the number. Stocks are likely to remain firm as long as downside pressure remains on the debt market.

The strong close in the September E-mini S&P 500 has put this market in a position to rally further with a cluster of Gann angles and a .618 retracement level the next potential upside target.

On Thursday the cluster will be formed at 1086.75 to 1088.00, an uptrending Gann angle/retracement level combination. The downtrending angle will fall between these two levels at 1087.75. This could be indicating that this market has more room to run to the upside tomorrow.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Gann Cluster Indicates E-mini S&P Headed to 1086.75 – 1088.00

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 01 Sep 2010 23:17:00 GMT

The strong close in the September E-mini S&P 500 has put this market in a position to rally further with a cluster of Gann angles and a .618 retracement level the next potential upside target.

On Thursday the cluster will be formed at 1086.75 to 1088.00, an uptrending Gann angle/retracement level combination. The downtrending angle will fall between these two levels at 1087.75. This could be indicating that this market has more room to run to the upside tomorrow.

The September E-mini S&P 500 soared to the upside Wednesday morning boosted by strong economic data from Australia and China. Although the ADP employment outlook surprising missed analyst estimates, investors shrugged off the news. Thin trading conditions may have contributed to the rally. Many large traders and institutions have been on the sidelines this week due to Monday’s Labor Day holiday. In addition, other key market players have chosen to stand aside in front of Friday’s August U.S. Non-Farm

The strong rallies in the Euro and the three major risk-linked currencies finished sharply higher and near their highs while showing no signs of a letup into the close. Whether it was short-covering or fresh buying, investors celebrated good global economic news by driving the U.S. Dollar lower and most major markets higher.

Upside momentum is expected to continue overnight, but traders will have to face a decision about whether to keep up this robust pace so close to the U.S. Non-Farm Payrolls Report on Friday. In addition, investors get a chance to assess more U.S. economic data on Thursday including weekly initial claims, Factory Orders and Pending Home Sales.

The Euro surged to the upside overnight, taking out the last swing top at 1.2779 and changing the main trend to up on the daily chart. Based on the range of 1.3334 to 1.2587, the September Euro is now set up for a possible test of the retracement zone of this range at 1.2960 to 1.3049. A downtrending Gann angle from the 1.3334 top is at 1.2974, suggesting the formation of a resistance cluster at 1.2960 to 1.2974 today and 1.2954 to 1.2960 on Thursday.

The initial catalyst behind the surge in the Euro overnight was the bullish PMI news from China and the better than expected growth report from Australia. Both news pieces helped rally Asian stocks leading to greater demand for risk and subsequently the Euro.

News that the Euro Zone manufacturing recovery hit a six-month low failed to halt this morning’s advance. Overnight it was reported that the manufacturing purchasing managers’ index slowed to 55.1, with “moderated” growth both in output and new orders.

According to the report, the hardest hit country in the Euro Zone was Greece which is still trying to recover from its financial crisis from the Spring. Germany and France posted “strong growth”. The report also showed that the improvements were “still centered on Germany, the Netherlands and Austria”. The recovery was “comparatively modest” in Italy and Spain.

Although this report suggests that the region is cooling, the strength in Germany and France should be noted. The weaker countries are likely to bring up this fact at the next European Central Bank meeting on September 3. ECB members want to be assured that the Euro Region as a whole recovers at a similar pace so that the stronger countries do not dominate the weaker economies.

Despite the change in trend to the upside in the Euro, momentum must continue to remain strong to drive this market to the objective minimum objective of 1.2960 over the near-term.

The Dollar declined against the Euro and commodity-linked currencies throughout the New York session after U.S. manufacturing activity showed a surprise improvement last month. This news came unexpectedly and indicated that despite calls for a double-dip recession, there were identifiable areas of strength in the economy.

Wednesday’s down move in the Dollar began last night following the release of stronger economic data from Australia and China. Investor appetite for risk was whetted with the news, triggering a sharp rally in the Australian, New Zealand and Canadian Dollars.

Earlier this morning traders shrugged off a weaker than expected ADP employment report, signaling that the focus would be on growth. The ADP number suggested that Friday’s U.S. Non-Farm Payrolls Report will likely be in line with pre-report estimates of a 106K to 120K jobs lost and an increase in the Unemployment Rate to 9.6%.

Technically the September Euro changed the trend on the daily chart to up on the move through 1.2779. This sets up the strong possibility of a retracement to a major 50% level at 1.2960. Upside momentum has to continue on Thursday to keep this forecast in line. Some traders doubt that the rally was triggered by real buyers because of thin pre-report and pre-holiday trading.

The September Australian Dollar was a big mover on Thursday, posting a strong gain of over 2.00%. The rally also exceeded a retracement zone at .8995 to .9049. This move sets up a potential rally to a downtrending Gann angle at .9131.

Australian Bonds sold off following the report of a surge in Australian GDP by 1.2 percent. This was the most rapid pace in three years and led to call for an interest rate hike by the Reserve Bank of Australia at its next meeting on September 7.

The surge in the Australian economy also spilled over to the New Zealand Dollar, which remained in a downtrend, but was threatening to break out above the last swing top at .7191.

Finally, the September Canadian Dollar benefited from higher crude oil, a better outlook for the U.S. economy and appetite for risk. Despite the bullishness of Wednesday’s trade, look for the Canadian Dollar to continue to straddle 50% of the main range of 1.0064 to .9208 at .9636.

The strong closes in all the major foreign currencies indicates that there may be a follow-through rally on Thursday, but there is still doubt among some traders whether the rallies today in the majors were real buying or weak shorts getting driven out of the market.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Charts indicate E-mini S&P Could test 1008.00 by Thursday

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 01 Sep 2010 18:14:00 GMT

The September E-mini S&P 500 soared to the upside this morning boosted by strong economic data from Australia and China. Although the ADP employment outlook surprising missed analyst estimates, investors shrugged off the news. Thin trading conditions may have contributed to the rally. Many large traders and institutions have been on the sidelines this week due to Monday’s Labor Day holiday. In addition, other key market players have chosen to stand aside in front of Friday’s August U.S. Non-Farm Payrolls Report.

This morning the E-mini S&P 500 completed a 50% retracement of the 1127.75 to 1037.00 range to 1977.25. If upside momentum continues, then look for the rally to reach the Fibonacci retracement level at 1088.00.

Downtrending Gann angle resistance on the daily chart is at 1089.75. An uptrending Gann angle from the 1002.75 bottom is at 1084.75. The combination of the Gann angles and the Fib level form a cluster at 1084.75 to 1089.75.

On Thursday the cluster will be formed at 1086.75 to 1088.00. The downtrending angle will fall between these two levels at 1087.75. This could be indicating that this market has more room to run to the upside tomorrow.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

ADP Data Falls; Traders Focus on Australia and China Economic Data

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 01 Sep 2010 13:25:00 GMT

Stocks rallied overnight after the Australian economy showed more than expected second quarter growth and China’s PMI was reported stronger than estimated. Both reports triggered a surge in demand for higher risk assets overnight which led to the sharp rise in equities.

U.S. equity markets traded sideways to lower for several hours before this morning’s lower than expected ADP report. The headline news appeared to be bearish but stocks tested the earlier high for the day anyway before starting a slight sell-off. The real test this morning will be whether U.S. investors chase this market higher or wait for a pullback ahead of Friday’s Non-Farm Payrolls Report.

The September E-mini chart pattern suggests that there is room to rally to 1077.25 over the near-term, but the question remains will U.S. investors take a side in this market ahead of Friday’s jobs data or will last night’s and this morning’s reports be enough to scare shorts out of their positions.

Demand for risk is pressuring the Treasurys this morning. The September T-Bonds briefly cut losses after the ADP report, but yields remained higher.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Euro Basing indicates Impending Volatility

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 01 Sep 2010 06:14:00 GMT

Thin trading conditions and economic reports led to a “roller-coaster” type trading session in the Euro on Tuesday. The European single currency rallied on a better than expected German jobs report, topped on strong U.S. Consumer Confidence data then, after trading sideways throughout the mid-session, drifted lower into the close following the release of the Fed minutes.

The Euro gained strength overnight after it was reported that Germany’s jobless numbers fell less than economist estimates. The market reacted as if the number was bullish instead of just slightly lower than the pre-report guess. Technically the Euro found support last night slightly in front of last week’s bottom at 1.2587. It rallied when U.S. stocks opened higher and sentiment shifted toward risk.

At 9 am CDT the Euro topped following a better than expected Consumer Confidence Report. The actual number of 53.5 blew out the consensus figure of 50.0. The surprise nature of this number drove investors back into the Dollar. At this point the Euro broke from 1.2742 to 1.2680 before settling into a trading range.

After a quick rally to 1.2701, the September Euro began to break following the release of the Fed’s Minutes from its last FOMC meeting. This market broke hard into 1.2661 as the report indicated the Fed is ready to take appropriate action should the U.S. economy deteriorate “appreciably”. The willingness of the Fed to consider taking additional steps to provide more support if the economy weakens further drove traders into the safety of the lower-yielding currencies, thus weakening the Euro.

Technically the Euro is in a downtrend, but the recent sideways action has this market poised to move sharply in either direction. A break to the downside is likely to run stops under the last swing bottom at 1.2587 all the way to the Fibonacci level at 1.2433.

A breakout over 1.2779 will change the main trend to up and could ignite the start of a rally to 1.2960.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks Survive Test of Lows; Soar into Close

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 01 Sep 2010 06:10:00 GMT

Investors sold off U.S. equities shortly after the Fed released its August Federal Open Market Committee meeting minutes but short selling dried up a little under a key short-term retracement zone. Thin trading conditions triggered a huge short-covering rally into the closing bell.

After a strong surge to the upside on the opening, the September E-mini S&P 500 began to weaken as bullish traders remained on the sidelines ahead of Friday’s U.S. employment report and Monday’s Labor Day holiday.

In its Minutes, the Federal Reserve said the outlook for the economy would have to deteriorate “appreciably” to spur fresh stimulus from the central bank. This statement didn’t sit well with investors who sold off the market into a retracement zone at 1046.00 to 1044.00. Downside momentum actually took out this zone but the daily chart uptrending Gann angle at 1042.75 stopped the break.

With all the sellers out of the way, bottom pickers gained control, triggering a strong short-covering rally into the close.

Thin conditions are likely to lead to volatility on Wednesday especially after the ADP employment number, but the market may settle into a range for the duration of the session.

The way of least resistance is down and this market looks vulnerable to the downside. It seems like just a matter of time before the bottom falls out. Low volume and thin trading conditions could be helping to prevent a sharp sell-off at this time. Tuesday’s late short-covering rally may also make bears think twice about shorting the Spoos in the hole. This means that another short-covering rally is possible before the next shorting opportunity arises.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

E-mini S&P 500 Giving Up Gains at Mid-Session; Testing Retracement Zone

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 31 Aug 2010 18:48:00 GMT

After a strong surge to the upside on the opening, the September E-mini S&P 500 is beginning to weaken as traders remain on the sidelines ahead of Friday’s U.S. employment report and Monday’s Labor Day holiday.

The technical outlook on the hourly chart is as follows. On Sunday night, the ESU10 topped at 1072.75, leading to a huge decline to 1037.50. This break created a retracement zone at 1055.00 to 1059.25. Today’s intraday rally stopped at 1054.25. So basically the market stopped short of a clean 50% retracement.

Based on the short-term range of 1037.50 to 1054.25, look for a correction back to 1046.00 to 1044.00. Buyers may try to establish a secondary higher bottom inside this zone in order to take another shot at the high for the day later into the close.

In its just released Minutes, the Federal Reserve said the outlook for the economy would have to deteriorate “appreciably” to spur fresh stimulus from the central bank.

After an initial surge to 1053.00, the September E-mini began to break, putting it in a position to test the key retracement zone at 1046.00 to 1044.00. A daily chart downside target remains 1042.75. This is an uptrending angle from the 1002.75 bottom.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Is Euro Rallying Because of Bad Analyst Estimate?

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 31 Aug 2010 13:32:00 GMT

It seems we’ve hit that point in the economic cycle where traders celebrate the quality of the analyst guess. We saw it last week when U.S. GDP fell to 1.6% but stocks rallied initially because the pre-report guess was 1.3%. This morning the Euro is rallying because Germany’s federal labor office said the seasonally adjusted number of unemployed workers fell by 17,000 in August. Economists had forecast a decrease of 20,000 in the number of people without jobs.

I suppose you can build a case for calling this report a steady improvement in the labor market which suggests that the German economy is improving but at a slower pace.

Actually when a market rallies because the report was better than the pre-report estimate, it doesn’t necessarily always mean new buyers came in. Many times investors are merely adjusting their positions triggering a short-covering rally. To professional traders it’s not always about being right or wrong about the market as much as it is having the right size on in order to manage the risk.

On the better than expected news this morning the September Euro rallied, triggering a short-covering rally in front of the previous main bottom at 1.2587. Last night’s sell-off created a swing top at 1.2779, helping to form a minor range of 1.2587 to 1.2779. The main trend will turn to up on a trade through 1.2779. The downtrend will resume on a trade through 1.2587.

In the bigger picture, the main range is 1.1876 to 1.3334. This range has created a major retracement zone at 1.2605 to 1.2433. The charts indicate that a failure to hold the 50% level at 1.2605 should trigger a break to the .618 retracement price at 1.2433. An uptrending Gann angle at 1.2486 could slow down the rate of the descent should this market find selling pressure.

It’s a little premature to talk about the long-side of the Euro if you are a trend-trader until 1.2779 is taken out. If this occurs then the first upside target will be 1.2961 to 1.3049. Counter-trend traders may have stepped into the long-side this morning. The general rule for counter-trend traders is “find an exit first before entering”, and based on this morning’s activity, this exit may have been identified as 1.2587.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

E-mini S&P: Is 1037.00 the Line in the Sand?

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 31 Aug 2010 13:29:00 GMT

The September E-mini S&P 500 made another successful test of last week’s low at 1037.00, indicating either fresh buying by bottom pickers or fear over selling in the hole and getting trapped in a short-covering rally.

Technically, despite holding the bottom at 1037.00 (which is horizontal support), the market pierced an uptrending Gann angle (which is diagonal support) at 1042.75. So while it looks as if buyers are defending last week’s low at 1037.00, the structure of the chart pattern suggests that sellers are trying to weaken the foundation. If selling begins to accelerate, then the next downside target is 1022.75.

Light volume continues to plague the market as many traders have taken an extended summer vacation ahead of the Labor Day week-end. At this time it’s difficult to say whether fresh buyers are actually stepping in to buy the dips or if enough large bids are being placed just to hold the S&P market up until either Friday’s employment report or until traders return next week.

On the upside, should an intraday support base be build, then look for a possible rally into a downtrending Gann angle at 1055.75. Let’s get there first before we start to worry about it.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Plethora of Economic Data to Keep Investors on Edge

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 30 Aug 2010 22:38:00 GMT

Employment worries help trigger a sharp sell-off in U.S. equity markets on Monday, leading to speculation that the month will end with another weak day on Tuesday. The problem with the market this week is Friday’s Non-Farm Payrolls Report. The market is looking for a decline of 106K to 120K and a jobless rate of 9.6%. Investors are worried that after a summer of weak economic reports, the season will end with a bearish jobs report.

Monday’s ho-hum Personal Income and Personal Spending reports did not provide the power stocks needed today to sustain earlier gains. This led to a day-long sell-off which took the markets beyond a normal short-term retracement and left them in a position to challenge last week’s lows.

Thin trading conditions and a plethora of economic reports can fuel a pretty volatile day on Tuesday. Shortly after the start of tomorrow’s trading session, investors will have the opportunity to digest the housing market with the Case-Shiller 20-city index, manufacturing with the Chicago Purchasing Managers Index and Consumer Confidence. Later in the day, the Minutes of the FOMC Meeting will be released. This report will give opportunities a peek at what the Fed discussed at its last meeting when it decided to leave interest rates unchanged, but shift the proceeds out of mortgage securities into Treasury securities.

Early in the trading session, the September E-mini S&P 500 rallied in a follow-through move following Friday’s robust closing price reversal bottom. The market ran out of steam early in its attempt to retrace to 1082.25 to 1093.00. The subsequent sell-off and weak close has put this market in a position to challenge a major uptrending Gann angle at 1042.75 and the last swing bottom at 1037.00. A break through this area could trigger an even further decline into the next uptrending Gann angle at 1022.75.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

BoJ Decison Accomplishes Nothing

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 30 Aug 2010 18:17:00 GMT

The big news story today involves the Japanese Yen. Early in the trading session, the Bank of Japan announced that it would expand its current 20 trillion Yen quantitative easing program to six months from its current three-month time frame. At the same time it increased the amount of funds available by 10 trillion Yen.

The BoJ expected this action to weaken the Yen instead it’s the U.S. Dollar that is trading sharply lower against the Yen. Traders are reacting as if they had expected the move or were waiting for something more intense.

Last night the Japanese Yen stopped just short of turning the main trend on the daily chart to down with a move through 1.1579. The subsequent rally identifies the importance of this price.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Not Much Holding Up British Pound

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 30 Aug 2010 18:15:00 GMT

The September British Pound is trading lower and in the middle of nowhere on the daily chart. It’s hard to describe what traders are trying to do based on the current chart pattern. What is clear, however, is that a break through the recent low at 1.5371 is likely to trigger a break all the way down to the major 50% price level at 1.5113.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Euro Could Weaken to 1.2605

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 30 Aug 2010 18:14:00 GMT

The September Euro is feeling pressure after failing to rally following a test of a 50% level at 1.2754. The key area to watch is 1.2605 to 1.2687. A break through this zone will reaffirm the downtrend and likely trigger an acceleration to the Fibonacci retracement level at 1.2433.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

U.S. Dollar Posting Strong Gains

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 30 Aug 2010 18:12:00 GMT

The U.S. Dollar is trading higher against most major currencies at the mid-session. The falling stock markets are contributing to the selling pressure in the higher-yielding currencies while a move to weaken the Japanese Yen has drawn the opposite reaction by traders.

U.S. stocks extended losses throughout the session after the release of U.S. income and consumption data showed meager advances in income and consumer spending. Increased M & A activity and a stock buyback by HP also failed to generate any interest in the long side of the market.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Gold Trading Flat; Downside Target $1228.90

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 30 Aug 2010 18:10:00 GMT

December Gold is trading flat to lower today in light trading. Last Thursday’s reversal top seems to have frozen the market at current levels. The current developing chart pattern suggests that a break to $1228.90 is possible.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

S&P 500 Fails after Early Surge

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 30 Aug 2010 18:08:00 GMT

U.S. equity markets rallied last night in continuation of the bullish reversal on Friday. Today’s rally, however, fell short of the first upside target at 1082.25. Friday’s reaction following a test of 1037.00 was met with strong short-covering. Today’s break may be an attempt to attract fresh buying while trying to form a secondary higher bottom.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Treasury Bonds may be Forming Secondary Lower Top

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 30 Aug 2010 18:06:00 GMT

December Treasury Bonds are trading sharply higher after falling to follow-through to the downside following last week’s daily and weekly closing price reversal tops. The move to the upside today may be a sign that last week’s break following Bernanke’s comments on Friday may have been an overreaction to the downside.

Despite today’s rally, the reversal pattern remains intact with 130’17 a possible downside target. The move taking place today may be setting up a secondary lower top.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Crude Oil Close to Finishing Retracement; Hurricane Could be Surprise

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 30 Aug 2010 13:05:00 GMT

The threat of another hurricane later this week combined with a pick-up in demand for higher risk helped drive December Crude Oil higher last week. Last night the market had a bit of a follow-through but it weakened just short of a major 50% price level at 78.41. With the main trend down, look for traders to sell the rally into this retracement level.

Technical factors, slow demand and building inventories are likely to pressure crude oil throughout the week. The only surprise will be the hurricane. Traders will react throughout the week depending on which direction the hurricane decides to take.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

BoJ Action Triggers Flight to Safety; S&P Called Lower

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 30 Aug 2010 13:01:00 GMT

U.S. Equity markets are expected to open flat to lower this morning after an earlier rally fizzled. Friday’s reversal bottom following a successful test of 1037.00 in the September E-mini S&P 500 was a strong sign that the market liked Bernanke’s comments on Friday. Today investors will have to decide whether traders were buying value or just producing an oversold technical bounce. Should the rally regain steam today, look for the September E-mini S&P make a run at 1082.25.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Traders Balk at BoJ Action; Yen sharply higher versus Dollar

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 30 Aug 2010 12:58:00 GMT

An emergency easing by the Bank of Japan may have backfired overnight as the Yen erased its early losses against the major currencies. The BoJ made the move in the hopes it would weaken the Japanese Yen, but instead it’s business as usual this morning with the Yen sharply higher versus the U.S. Dollar.

Late this morning the BoJ said it would expand its current 20 trillion Yen quantitative easing program to six-months from its current three-month time frame. It also increased the amount of funds available by 10 trillion Yen.

The moves expressed by traders this morning seem to indicate that the trading public perceives the activity by the BoJ as too little, too late as the action suggests the central back is being reactive instead of proactive.

Technically, after an attempt to breakdown to the downside through the last swing bottom at 1.1579, the September Japanese Yen is now trading sharply higher. The last main top at 1.1966 seems safe at this time, but could be challenged later in the day if 1.1840 cannot reject today’s rally.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

What it is Going to Take to Trigger an E-mini S&P Rally

jhyerczyk@yahoo.com (James A. Hyerczyk) — Fri, 27 Aug 2010 17:06:00 GMT

High volatility is the theme today in the equity markets at the mid-session. Today’s trading session has seen a two-sided trade. At first the markets rallied on news of a better than expected Second Quarter GDP report, but turned lower when Fed Chairman Bernanke began to speak at the central banker’s conference in Jackson Hole, Wyoming.

During his speech, Bernanke clarified a few points. One, he said that the Fed decided to purchase more longer-term debt with proceeds from its bonds that mature for both technical and stimulus reasons. Two, he explained his current view of the economy and three he said the Fed is not out of bullets and that it has several options.

Bernanke, however, may have helped turn the stock markets higher when he said the Fed has the willingness to use more quantitative easing if necessary. The fact that he didn’t suggest it “was necessary” may have been the key factor triggering today’s turnabout. Another potentially bullish factor was the fact that the Fed did not change its 2011 forecast.

Technically here is what we are looking at. The September E-mini S&P 500 held the low for the week at 1037.00. This kept Wednesday’s closing price reversal bottom formation intact. The key to triggering a strong rally remains the follow-through to the upside.

At this time there are three areas that have to be overcome in order to trigger a breakout to the upside and perhaps a retracement back to 1082.25. First, the market has to take out Thursday’s high at 1061.75. Second, the Gann angle at 1065.25 has to be pierced with conviction. Thirdly, the market has to close above the 50% level at 1065.25. If these three things occur then in my opinion the shorts will be forced to cover.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks Firm on Decent Jobs Data; Traders Want Clarity from Bernanke

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 26 Aug 2010 13:08:00 GMT

Earlier in the week I questioned whether the Fed was out of bullets to combat the economic weakness threatening the U.S. economy. Having watched two dismal U.S. housing reports this week, I am now anxiously awaiting Federal Reserve Chairman Bernanke’s outlook for the economy, his explanation for the Fed’s recent decision to buy Treasury Bonds, and perhaps what the Fed could possibly have left in its toolbox to combat the threat of a double-dip recession.

No one is certain what Mr. Bernanke will talk about on Friday at the annual Fed gathering of central bankers in Jackson Hole, Wyoming. There is plenty to talk about since the economy has changed so much since the last Fed meeting earlier in the month. Based on his recent public statements, the Fed Chairman is likely to reiterate his concerns about persistently high unemployment and the extremely low inflation rate that is threatening to drive the economy into a deflationary scenario.

Because of the current fragile state of the economy, Mr. Bernanke’s comments are likely to move the equity and debt market substantially. Since he doesn’t have the evidence to paint a rosy outlook, he is going to have to stay the course by reiterating that the economy remains “uncertain” and cooling off or he may reveal a bleaker outlook.

There is no question based on current activity in the Treasury and equity markets that the Fed is moving the market. Its recent decision to buy Treasury Bonds, for example, has triggered a huge rally in this market prompting some to call it a “bubble”. Equity markets have weakened since the last Federal Open Market Committee meeting because its move to buy Treasurys sent a message that perhaps the economy was weaker than previously thought.

I believe Bernanke has to speak about the economy with clarity and conviction. This may help to bring relief to those investors suffering from a “crisis in conference”. Bernanke also has to provide a little color about what the Fed is considering to do should the economic situation continue to worsen. One thing that he may shed some light on is whether the Fed is considering lowering the interest rate on reserve deposits banks have with the Fed. This may encourage banks to open up their lending windows a little.

This morning U.S. Weekly Jobless Claims fell more than expected, down 31,000 to 473,000. Although this is not a particularly great number, equity markets seem to like it, leading to a call for a higher opening. Treasury Bonds weakened on the news.

Yesterday the September E-mini S&P 500 made a daily closing price reversal bottom while the September Treasury Bonds were making a daily closing price reversal top. These trades were triggered by technical factors and an asset allocation play. There is no strong evidence that the moves will lead to a change in trend, but the charts indicate that stocks have room to rally and T-Bonds have room to correct.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

U.S. Stock Traders Shrug Off Bearish Home Data

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 25 Aug 2010 16:31:00 GMT

U.S. stock indices briefly stumbled after the release of a potentially bearish New Home Sales Report. Traders quickly saw value on the move and began buying equities. This rally occurred almost simultaneously with the break from the high in Treasury Bonds suggesting that an asset allocation may be in the works.

Technically, after failing to hold a .618 retracement level at 1050.50, the September E-mini S&P 500 broke sharply lower, but losses were limited by an uptrending Gann angle from the 1002.75 bottom at 1038.75. Weak stops were hit when the market broke this angle on the first test, but shrewd traders quickly identified value and began buying the contract.

Once the Gann angle was regained, shorts continued to cover and some fresh bottom pickers arrived. A strong intra-day rally ensued, taking the E-mini S&P 500 to 1048.75. This high was below the retracement level at 1050.50 but clearly indicated that in order to take this market higher, the market must regain 1050.50.

Technically, the set-up is there for a daily closing price reversal bottom. All we need at this time is a higher close.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

T-Bonds Could Be Making a Short-Term Top

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 25 Aug 2010 16:10:00 GMT

September Treasury Bonds rallied to 136’31 shortly after the release of a weak U.S. Durable Goods report. This was a new high for the year. The market backed down following the move as traders took a cautious approach ahead of the 9 a.m. CDT U.S. New Home Sales report.

U.S. New Home Sales were reported weaker than expected triggering a rally in the Treasury Bonds which fell short of the high for the day. The subsequent break from 136’28 on the intra-day chart formed a double-top as profit-taking drove the T-Bonds lower. This pattern is particularly interesting because it makes it look like the market has run out of buyers and may be ripe for a correction.

The best sign of a short-term top today would be a closing price reversal. Watch into the close to see if this market starts to weaken. If it does close lower, it will be the second closing price reversal top since Friday. This would be a strong indication that long traders are getting nervous at such lofty levels.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Worsening Outlook for Economy Driving Up Treasury Bonds

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 25 Aug 2010 12:04:00 GMT

The worsening outlook for the economy continues to tell investors to buy Treasurys. The Fed told us a couple of week’s ago to buy Treasury Bonds. Japan and large institutions have been buying Treasury Bonds. All of these transactions are telling us to be conservative.

The Treasury Bonds are in a true bull market yet it almost seems that it has been difficult for some major players in the market to admit that they have missed this rally. Almost everyday someone is coming out in the media calling for an asset “bubble”, yet the Treasurys continue to soar higher. In fact if you google “Treasury Bond Bubble”, you will find references back to at least 2008 calling for such an event after the Fed first lowered interest rates to virtually zero.

The inability to admit that they have missed the bull market may be one reason why some analysts and the media are calling for a top, but at some point it seems it will be a self-fulfilling prophecy. Markets do make corrections so it is likely the Treasury Bonds will break from their lofty levels at some time, but let’s hope that each correction is not met with “I told you so” articles.

Years ago the Treasury warned of a housing bubble, but offered no alternative to holding your home. No one spoke up and said “sell your primary home” because the market is going to come down and prices are going to collapse.

U.S. Treasury markets are a unique asset class. An investment pays you guaranteed interest and the principal is guaranteed. Stocks, gold and other commodities are not guaranteed. No one is saying keep all your eggs in one basket because obviously you can lose buying power if interest rates begin to rise, but there are thousands of investors who are buying Treasurys for the interest payment and principal guarantee. Thousands who are willing to hold on to there investments until maturity.

With the U.S. economy cooling off and some warning of a possible double-dip recession, Treasury investors are reacting no differently than a person in the path of a hurricane. They are taking protection. There doesn’t seem to be any rampant speculation. In fact this recent run in the September Treasury Bonds from about the 130’00 area was triggered when the Fed said it was using the proceeds from its mortgage investments to buy Treasuries. As an investor, it seems prudent to want to be on the side of the Fed.

Overnight traders are taking a cautious approach ahead of the Durable goods and New Home Sales Reports. Tuesday’s worse than expected U.S. Existing Home Sales hit the equity markets hard as it served as strong evidence that the economy was cooling off.

Economists are estimating new home sales in July to be 330,000. Any data that is weaker than expected will weigh on market sentiment. This means that the prevailing asset allocation strategy will continue with investors shedding risky assets in favor of the protection of the Treasury markets.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Futures - U.S. Stock Traders Keying On New Home Sales

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 25 Aug 2010 11:58:00 GMT

Stock Index futures are relatively quiet overnight and the outlook is for a slightly lower opening, nonetheless, last night’s close has the indices on a seven-week low and in a position to work lower.

Overnight traders are taking a cautious approach ahead of the Durable goods and New Home Sales Reports. Tuesday’s worse than expected U.S. Existing Home Sales hit the equity markets hard as it served as strong evidence that the economy was cooling off.

The September E-mini S&P 500 is hovering around a .618 retracement level at 1050.50. A failure to hold this level is likely to trigger an acceleration to at least 1038.75.

Regaining and sustaining a rally above 1050.50 could force shorts to cover. This could trigger an acceleration to the upside back to 1065.25.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Futures - Crude Falls on Supply/Demand Issues

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 24 Aug 2010 22:55:00 GMT

December Crude Oil continued its downslide on Tuesday due to demand concerns and growing inventories in the U.S. Since breaking Fibonacci support at 76.45 on August 19, crude oil has dropped over $3.00 per barrel to the July 6 bottom at 73.15. If downside momentum continues, the market should test the May 25 bottom at 71.50 shortly.

The slowdown in the U.S. economy has forced many analysts to cut their demand outlook over the short-term. China is also cutting back a little. With the world’s too largest economy’s demanding less crude oil, the market really has no place to go but down.

With the end of driving season right around the corner, U.S. inventories are expected to continue to increase.

Technically, the trend is down, but the market is nearing two key bottoms at 73.15 and 71.50. With the market down 14 days since the top at 84.45, trader should be careful not to aggressively short this market in the hole due to the threat of a possible short-covering rally. Oversold conditions make this market ripe for a closing price reversal bottom especially if Wednesday’s Energy Dept. inventories report comes out better than expected.

Traders should also watch the weather for possible disruptions in the oil supply. The threat of a hurricane may lead to a refinery shutdown. This type of news has been known to cause a short-covering spike in oil prices.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Futures - Wall Street Journal Article Fuels Treasury Bond Rally

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 24 Aug 2010 18:09:00 GMT

September Treasury Bonds rallied after a report in the Wall Street Journal indicated that there may be some dissension brewing in the Fed . In any case, the article may have made traders aware that, like it or not, the Fed is dictating the direction of the Treasury Bond market.

When the Fed announced at its FOMC meeting earlier in the month that it was using the proceeds from its mortgage investments to buy Treasury Bonds, it may have inadvertently told investors that the economic recovery could be cooling off faster than previously expected.

Fear hit the markets overnight triggering a strong rally in the Treasury Bonds despite a new Two-Year Note auction this afternoon. The sharp rally took out Friday’s high at 135’07, negating last week’s closing price reversal top.

All eyes remain on the Treasury complex because of the almost daily calls for a “Bubble” formation. Despite all the predictions circulating, investors are buying Treasurys for sound economic reasons and not for speculative reasons.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Futures - Gold Rebounds after Testing 50% Level

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 24 Aug 2010 18:07:00 GMT

Yesterday I told you the technical formation indicated that December Gold was closing weak and was likely to decline into $1215.00. This morning Gold broke hard and touched $1211.70. The lack of follow-through to the downside after the 50% level at $1215 was penetrated triggered a short-covering rally. Upside was strong enough to regain a Fibonacci level at $1228.00, putting the market in a position to challenge the recent top at $1239.50.

This afternoon’s rally tested an uptrending Gann angle at $1235.30 from underneath. This could be the market trying to verify the top or it could mean more. Regaining this angle will put the market in a strong position once again.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Futures - S&P 500 Regains .618 Retracement Level

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 24 Aug 2010 18:05:00 GMT

Last night’s week close in the September E-mini S&P 500 indicated a lower opening and traders accommodated by opening under a key 50% level at 1065.25. This move signaled that the next level to test would be the .618 retracement level at 1050.50.

After testing and holding 1050.50 early in the trading session, strong buyers failed to show up. Strong sellers then took over, pushing this market through the Fibonacci level. After taking out weak stops, the market has regained this level and stabilized.

A failure to hold 1050.50 late in the session could trigger further weakness into an uptrending Gann angle at 1037.75. Should the E-mini S&P rally late in the session and take out 1065.25, then look for a possible test of a downtrending Gann angle from the 1127.75 top at 1075.75.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Futures - Fed Fuels Crisis in Confidence

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 24 Aug 2010 10:48:00 GMT

September Treasury Bonds advanced overnight on growing concern the U.S. recovery is stalling, increasing demand for the relative safety of government debt.

Traders are driving down yields of T-Notes and T-Bonds in anticipation of a drop in Existing Home Sales today and a moderate growth in the U.S. GDP on Friday. Adding to the decline in yields is the increasing supply of government debt. The government plans to sell $37 billion in Two-Year Notes today.

The recent rally in September T-Bonds was ignited earlier this month when the Fed announced it was buying Treasuries. Despite predictions of a “bubble”, demand has been brisk. Deflation fears are definitely growing, giving investors a strong reason to purchase long-term government debt.

The strong surge overnight may be a reflection of demand for Treasuries ahead of Fed Chairman Bernanke’s speech on Thursday at the central banker’s conference in Jackson Hole, Wyoming.

If investors are buying Treasuries on concern the U.S. recovery is stalling, then today’s Existing Home Sales Report should be a market mover. Analysts are forecasting a decline from 5.37M to 4.60M or a decline of 14%. The consensus is calling for 4.72M.

Adding fuel to the fire this morning is a report from the Wall Street Journal saying the Fed was divided over monetary policy direction at its last meeting. It is being reported that at least seven of 17 Federal Reserve officials opposed or balked at the decision to stimulate the economy by keeping the Fed’s securities portfolio from winding down. The key issue was whether the central bank should reinvest the proceeds from mortgages back into the markets.

The Fed was divided by those members who were concerned about the economy and “more inclined to act” and those who doubted the effectiveness of the move and the negative message it would send to the markets.

Although each camp was permitted to express its concerns, the Federal Opening Market Committee sided with Bernanke who pushed for the move and ultimately prevailed. Despite close to 50% of Fed officials opposing the decision, voting members favored the decision 9 to 1.

The overnight rally in the September Treasury Bonds may be reflecting the fear that the economy is headed toward a double-dip recession. The Wall Street Journal article may be helping to fuel a portion of this rally as it provided more reason for investors to worry. If there is evidence of dissention in the Fed, then how can investors have confidence in its decisions? Anyway one looks at it, the Fed definitely stirred the pot this time. What the Fed’s recent action reveals is that it is actively influencing the financial markets and the perception is things are going to get worse.

Technically, September Treasury Bonds are up sharply overnight. This rally is threatening the potentially bearish closing price reversal top formed on August 20 and confirmed on Monday. This pattern usually leads to a 2 to 3 day break of at least 50% of the last swing up. In this case, the chart pattern was suggesting a break to 130’20 by Wednesday. A trade through 135’07 will negate the pattern and could trigger an acceleration to the upside.

September 10-Year Notes are threatening to take out the recent top at 126’08, However if this top cannot be penetrated then look for the start of possible long liquidation. Based on the current chart pattern on the daily, a move through 125’06 will turn the main trend down.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

December Gold Stuck Inside Price Cluster; Could Turn Bearish On Close

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 23 Aug 2010 17:12:00 GMT

December Gold is trading lower but movement has been limited because it has spent most of the day inside of a combination Gann angles/.618 retracement level cluster.

Here’s the technical breakdown. An uptrending Gann angle which has been helping this market trend higher is at $1231.30. The .618 retracement level is at $1228.00. Finally a pair of downtrending Gann angles from the tops at $1270.60 and $1267.50 is at $1226.60 and $1228.50.

At the mid-session, the market is at $1227.50, putting it in a weak position. This pattern could develop into a bearish pattern if it cannot regain the uptrending Gann angle at $1231.30 on a closing basis. Further evidence of this developing break will be a close on the weak side of the Fibonacci level at $1228.00.

The first downside target will be the 50% price level at $1215.00. This is followed by a retracement of the $1159.30 to $1239.50 range. The retracement zone is at $1199.40 to $1190.00.

An uptrending Gann angle from the $1159.30 bottom is at $1199.30 on Wednesday, August 25. This angle will form a cluster with the 50% level at $1199.40 and is a potential downside target should the market break hard.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Treasury Bond Reversal Confirmed; Three Day Break to 130'20 Possible

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 23 Aug 2010 12:33:00 GMT

Weakness in the Treasury markets is triggering an asset allocation shift this morning, leading to the call for a higher opening in the equity markets.

On Friday the September Treasury Bonds posted a daily closing price reversal top which was confirmed Sunday night. This pattern usually means the start of a 2 to 3 day break with a minimum 50% correction. If this analysis holds true, then look for a possible break to 130’20 by Wednesday.

I don’t believe this is the bursting of the so called “bubble”, but given the technical pattern, overbought conditions, the start of rollover and Bernanke’s speech later this week in Jackson Hole, WY, long traders can find several reasons to begin exiting their positions.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Is There Any More Fight Left in the Fed?

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 23 Aug 2010 11:26:00 GMT

One debate that will go on this week centers on the Fed . One question traders are asking, “Is the Fed out of bullets?” All signs point out that the government’s stimulus plans as well as the Fed’s activity have done nothing to stimulate the economy. The housing market is bad despite mortgage rates below 5%. Unemployment is high and expected to rise. Money has been made available to banks, but individuals and businesses have not been able to get credit.

Politics have played a major role in the downturn in the economy in my opinion. Instead of shoring up the economy and employment, the administration chose to fight for healthcare and financial reform. U.S. citizens are now worried that a tax hike is coming to pay for this legislation. Uncertainty over the healthcare plan is making it difficult for businesses to know their costs. This uncertainty is most likely preventing companies from hiring. At this time Congress is trying to decide whether to extend Bush’s tax cuts. A failure to do so will amount to a tax hike.

The November elections are also a concern for investors. Most seem to be taking a wait and see attitude because of the uncertainty over which party will gain control of the House and Senate.

I tried not to mention “uncertainty” but I had to at some point since the Fed and other central banks are using this word. This brings me to one of the only things I am “certain” about this week, and that is the Fed and its central bank colleagues will meet in Jackson Hole, WY on Thursday and Friday.

Dr. Bernanke will be giving a speech at the conference, but there is an ongoing debate as to whether he is going to be accommodating to the attendees by toning down his commentary or whether he is going to give a revised outlook for the economy. A hard commentary is likely to be a market mover, but some traders feel that holding back in his assessment of the economy will send a signal that the recovery is slowing at a much faster pace than originally estimated.

Before Bernanke speaks, traders will have had the chance to react to Existing Home Sales, Durable Goods and New Home Sales Reports. He will have the opportunity to speak before Friday’s GDP – Second Estimate, however. The report is expected to show a drop from 2.4% to 1.3%. Since Bernanke is already on record saying the economy has cooled, by reiterating this assessment one day before the report, he may take a little steam out of a weak number. In other words, it may turn out to be a sell the rumor, buy the fact situation.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Daily Reversal Top Likely to Trigger Sharp T-Bond Break

jhyerczyk@yahoo.com (James A. Hyerczyk) — Sat, 21 Aug 2010 00:27:00 GMT

Talk of a bubble forming in the September Treasury Bonds did not discourage buying in this debt instrument this week, but the daily closing price reversal top indicates a possible short-term top. If confirmed on Monday, look for this pattern to trigger a two to three day break to possibly 130’20.

The September E-mini S&P 500 finished the week near its low, but slightly above a key 50% price level at 1065.25. The weekly chart indicates the market still has more room to the downside with 1050.50 the next likely target. A test of this level could attract strong buying power.

December Gold had a strong run this week before profit-taking and the stronger Dollar weakened the market on Friday. Closing above a .618 level at $1228.00 kept the move intact but a break could be coming especially if equity markets rally. A failure to hold the .618 level could trigger a break to $1215.00 early in the week.

December Crude Oil closed under a key Fibonacci level at 76.45, indicating further downside is likely next week. Concerns over a weakening global economy is threatening demand for energy, leading to speculation that demand will drop.

The September Japanese Yen is still consolidating inside of the 1.1805 to 1.1579 range. The market appears to be forming a resistance zone as government and Bank of Japan officials try to decide the effect of the high priced Yen on the economy and whether to intervene. This market is expected to remain inside of a tight range until this decision is reached. This decision has the potential to exert a tremendous amount of influence on the market which is likely to lead to high volatility next week. In particular, a breakout to the downside could produce some tremendous gains as longs will no doubt scramble to get out of their positions.

The U.S. Dollar traded higher across the board under light trading conditions on Friday. Trader sentiment continued to remain locked around risk aversion as uncertainty over the strength of the global economy prevailed.

The September British Pound broke minor 50% support at 1.5560 and an uptrending long-term Gann angle at 1.5549. This move tripped stops and caused a soft break into a .618 support level at 1.5457 before settling into a range.

It was reported this week that U.K. retail sales were stronger than expected, but this news wasn’t enough to sustain the rally. Concerns about inflation and the effects of new taxes and spending cuts on the economy continue to weigh on investors. Earlier in the week, the Bank of England minutes showed that the Monetary Policy Committee voted 8 to 1 to support this month’s interest rate decision. The minutes also showed that inflation was discussed as well as a rate hike. The BoE seems to believe that inflation will fall back below the target rate of 2%, if left alone, by 2012. The central bank is basing this assessment on its evaluation of data which it interprets to mean that the current high inflation rate has been caused by temporary events.

The September Euro reaffirmed its downtrend when it broke a swing bottom at 1.2732. A new main top on the daily chart was formed at 1.2921. The next objective is the major retracement zone at 1.2605 to 1.2433. This area represents a retracement of the 1.1876 to 1.3334 range.

Talk surrounding the strength of the Euro Zone recovery helped pressure the Euro but the most bearish influence was comments from European Central Bank council member Weber who said he thought the ECB should wait until the first quarter next year before considering an exit strategy. This ignited a huge sell-off in the Euro as traders read the comments to mean the Euro Zone economy was not as strong as perceived.

Flight to safety selling is driving the September Swiss Franc lower. Former tops on the weekly chart are providing some light resistance, but the daily chart suggests the market should continue to remain underpinned. A series of bottoms at .9376, .9402 and .9421 are major support. The trend will remain up on the daily chart until these levels are violated.

The September Canadian Dollar is still ping-ponging between retracement levels at .9737 to .9456. Continue to play these levels until the market breaks out in either direction. The Canadian economy appears to be stuck because of the influence of the weakening U.S. economy. Uncertainty about future growth is cooling off the Canadian economy, leading to speculation that the Bank of Canada will leave interest rates at 0.75%.

Election concerns and the dumping of risky assets pressured the September Australian Dollar early in the session before it stabilized. The trend is down but the chart indicates there is room to break to .8644 over the near-term if sellers step back in after the week-end.

Polls are showing the election is too close to call with several analysts calling for a hung parliament. Taxes, spending cuts and the environment are key issues to be decided with this election.

The trend is down in the September New Zealand Dollar. 7191 is new main top on the daily chart. A trade through this level will turn the main trend up. Downside momentum is slowing today, but could pick up again if sellers show up. The chart indicates room to break to the .6977 level.

The September Dollar Index finished the week on its high. Overall the shift in sentiment toward risk aversion triggered this week’s rally. Early next week the Dollar should react to U.S. housing data. At the end of the week, the GDP Second Estimate should have a huge influence on the direction of the Greenback. The consensus is calling for growth of 1.3% versus 2.4% previously.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks under Pressure in Light Trading Session; Investors Eye Safety over Risk

jhyerczyk@yahoo.com (James A. Hyerczyk) — Fri, 20 Aug 2010 17:18:00 GMT

The September E-mini S&P 500 is trading lower in limited trading. Last night this market broke an uptrending Gann angle at 1068.25, triggering a decline into a 50% price level at 1065.25. Although this area was pierced slightly, heavy selling pressure failed to materialize. A close under this price could trigger a further decline to 1050.50. It looks as if the market is going to consolidate into the close unless traders decide to take profits or lighten up further into the week-end.

Flight-to-safety buying continues to drive the September Treasury Bonds higher. Short-term conditions seem to be overbought, but there doesn’t appear to be a big enough seller in the market to stop the rally. The best sign of a top will be a closing price reversal formation.

December Gold is trading lower today in what appears to be a profit-taking break. Some traders are selling gold because of the stronger Dollar. The key number to watch is $1228.00. A close under this level could trigger a further break to $1215.00. Strong selling in the equity markets could trigger another sharp rally.

December Crude Oil is under pressure after breaking the Fibonacci support level at 76.45. The trend is down and the market is expected to work lower over the near-term. Traders expect demand to continue to drop for energy as the global economy slows further.

The U.S. Dollar is trading higher across the board under light trading conditions. Trader sentiment continues to remain locked around risk aversion as uncertainty over the strength of the global economy prevails.

The September Euro reaffirmed its downtrend when it broke a swing bottom at 1.2732. A new main top on the daily chart was formed at 1.2921. The next objective is the major retracement zone at 1.2605 to 1.2433. This area represents a retracement of the 1.1876 to 1.3334 range.

The September British Pound broke minor 50% support at 1.5560 and an uptrending long-term Gann angle at 1.5549. This move tripped stops and a soft break into a .618 support level at 1.5457 before settling into a range.

Flight to safety buying is driving the September Swiss Franc lower. Former tops on the weekly chart are providing some light resistance, but the daily chart suggests the market should continue to remain underpinned. A series of bottoms at .9376, .9402, and .9421 are major support points. The trend will remain up on the daily chart until these levels are violated.

The September Japanese Yen is still consolidating inside of the 1.1805 to 1.1579 range. The market appears to be forming a resistance zone base as government and Bank of Japan officials try to decide the effect of the high priced Yen on the economy and whether to intervene.

The September Canadian Dollar is still ping-ponging between retracement levels at .9737 to .9456. Continue to play these levels until the market breaks out in either direction.

Election concerns and the dumping of risky assets pressured the September Australian Dollar early in the session before it stabilized. The trend is down but the chart indicates there is room to break to .8644 over the near-term if sellers step back in after the week-end.

The trend is down in the September New Zealand Dollar. 7191 is new main top on the daily chart. A trade through this level will turn the main trend up. Downside momentum is slowing today, but could pick up again if sellers show up. The chart indicates room to break to the .6977 level.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stock Indices Testing Critical Support; Investors Shying Away from Risk

jhyerczyk@yahoo.com (James A. Hyerczyk) — Fri, 20 Aug 2010 12:32:00 GMT

U. S. equity markets are called lower this morning based on a poor overnight showing. The catalyst for the overnight weakness was the shedding of risky assets by nervous investors.

The September E-mini S&P is currently testing 1065.25 which is 50% of the entire 1002.75 to 1127.75 rally. Since this market is sitting in the middle of the early July to August range, I guess you can say we are rangebound. In addition to testing a key 50% price level at 1065.25, this market also broke an uptrending Gann angle from the 1002.75 bottom. This may be a signal of lower prices to follow. The first downside target which comes to mind is 1050.50.

The September NASDAQ is testing its 50% level at 1808.00. Traders seem to be leaning on the short side, making the .618 level at 1782.00 the next potential downside target.

As mentioned in last night’s commentary, the pressure will be on the commodity linked currencies if investors decide to freak out about slow growth in the global economy.

Earlier this week the Australian Dollar failed to breakout to the upside and is now threatening to freefall to a major 50% price level at .8644. Investors are worried about tomorrow’s election. The polls are showing a dead heat which is complicating matters for investors. Key issues include mining company taxes, tightening the budget, and slashing the deficit. The chart indicates the Aussie could plunge to a major 50% price level at .8644.

The New Zealand Dollar has formed a new lower top at .7191. Lower demand for risky assets, the threat of a slow down in the global economy and worries about the Australian election are pressuring the Kiwi this morning. The charts indicate more room to the downside with .6977 to .6879 the next downside target.

The Euro broke sharply lower after European Central Bank member Axel Weber said the ECB should help banks through end-of-year liquidity tensions before determining in the first quarter when to withdraw emergency leading measures.

Traders sold off the Euro because this comment is being perceived as a sign of weakness. Many investors were pricing in the possibility that the ECB would begin its exit strategy before the end of the year. Shifting this outlook to the first quarter is encouraging investors to slash long positions today.

The downtrend resumed overnight in the Euro when it crossed the last swing bottom at 1.2732. A new main top was formed at 1.2921. Based on the main range of 1.1876 to 1.3334, look for a minimum break to 1.2605.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Where’s the Bubble? T-Bonds Soar on Safety Concerns

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 19 Aug 2010 22:36:00 GMT

September Treasury Bonds hit a new high for the year on Thursday. This move reversed earlier weakness in this market. Traders bought T-Bonds for safety and not speculation. Therefore, don’t believe the hype about a bubble formation. Quite frankly, why not buy them if the Fed saying they are going to buy them. Bond traders are probably the smartest traders in the world. They saw the weakness in the economy developing before anyone else did.

December Gold soared to the upside on Thursday following a sharp break in U.S. equity markets. Traders increased their long hedges in gold on the stock market weakness. As mentioned several times the past few weeks, gold (hard asset) and stocks (paper) are competing for the same investment Dollar. Gold has had a tendency to rally lately following sell-offs in the stock market. This trend continued on Thursday. The .618 level at $1228.00 has to hold in order to sustain the upside momentum.

Technically, gold broke out over a pair of major downtrending Gann angles from the $1270.60 and $1267.50 tops overnight. This helped trigger stops and bring in additional momentum buyers.

Equity markets were under pressure before the opening following a sharp sell-off this morning, triggered by a bearish initial claims report. The daily chart indicates that the September E-mini S&P 500 is poised to accelerate to the downside once it breaks an uptrending Gann angle at 1068.75 and a major 50% price level at 1065.25. This move could fuel more selling pressure to 1050.50.

The resumption of the downtrend in the equities markets triggered a sharp break in the commodity-linked currencies with the New Zealand Dollar leading the way lower. Today’s surprisingly bad U.S. weekly initial claims report renewed fears of a shutdown of the global economy. If investors continue to shy away from risk, then look for further weakness in the Canadian Dollar and Australian Dollar also.

One question traders are asking each other is whether the Dollar is trending or if it is rangebound. On one hand some traders believe in a bullish scenario for the Dollar because of flight to safety buying. Bearish traders believe the U.S. economy will grow at a slower rate than the rest of the world. This clash between the fundamentals could produce side ways action highlighted by periodic exaggerated swings.

Technically, the Aussie rally failed this week at the 50% price level of the .9221 to .8857 range at .9039. This move has set up a developing bearish secondary lower top. Based on the current chart pattern, look for further weakness with .8644 the next downside target.

Earlier this week the New Zealand Dollar completed a 50% retracement of its recent downswing. The range from .7355 to .6996 ended slightly above the .7175 level at .7191. The charts are suggesting a move to .6977 to .6879 is likely over the near-term.

On Thursday, the U.S. Dollar rose sharply as risk aversion is back on following a surprisingly weak U.S. jobless claims report. Especially hit hard during the Greenback’s rally were the commodity-linked currencies.

The Euro traded lower after a weak attempt to rally failed after the bearish U.S. report and on the heels of a better than expected forecast for German economic growth.

Technically the Euro is still rangebound amid confusion by traders. Buying and selling interest appears to be even as the bulls want to buy Euros on speculation of renewed strength in the Euro Zone economy but the bears feel the need to sell because of a dim outlook for the global economy.

The charts indicate impending volatility but the direction of the next move is not clear. A breakout to the upside is likely to be met with selling pressure at 1.3033 to 1.3104. A breakdown through support could trigger a downside acceleration to 1.2605 to 1.2433.

The British Pound received a boost Thursday morning following a better than expected U.K. retail sales report. This rally died, however, short of a breakout above the recent high at 1.5701 and after sentiment shifted away from risky assets.

Technically, the Sterling is trapped between a pair of 50% levels at 1.5560 and 1.5635. Major support is being provided by an uptrending Gann angle from the 1.4229 bottom at 1.5529 today. A close under this angle could trigger a tremendous downslide.

The September Japanese Yen started the day in a potentially bearish position as it tried to build resistance inside of a retracement zone at 1.1692 to 1.1719. At one time today, it looked as if the Yen was readying to breakout below the last swing bottom at 1.1579. This move would’ve changed the daily trend to down.

This market rallied sharply after the U.S. released a surprisingly bad weekly initial claims report. U.S. equities sold off on the news, triggering a flight to safety rally in the Japanese Yen. Unless this market can regain the retracement zone, look for 1.1579 to fail. This would put the Japanese Yen at a new multi-year low.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Gold Soars as Investors Hedge Equity Bets

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 19 Aug 2010 17:28:00 GMT

December Gold soared to the upside this morning following a sharp break in U.S. equity markets. Traders increased their long hedges in gold on the stock market weakness. As mentioned several times the past few weeks, gold (hard asset) and stocks (paper) are competing for the same investment Dollar. Gold has had a tendency to rally lately following sell-offs in the stock market. This trend is continuing today.

Technically, gold broke out over a pair of major downtrending Gann angles from the $1270.60 and $1267.50 tops overnight. This helped trigger stops and bring in additional momentum buyers.

Equity markets remain under pressure at the mid-session following a sharp sell-off this morning, triggered by a bearish initial claims report. The daily chart indicates that the September E-mini S&P 500 is poised to accelerate to the downside once it breaks an uptrending Gann angle at 1066.75 and a major 50% price level at 1065.25. This move could fuel more selling pressure to 1050.50.

September Treasury Bonds hit a new high for the year. This move reversed earlier weakness in this market. Traders are buying T-Bonds for safety and not speculation. Therefore, don’t believe the hype about a bubble formation.

The U.S. Dollar is rising sharply at the mid-session as risk aversion is back on following a surprisingly weak U.S. jobless claims report.

The Euro is now trading lower after a weak attempt to rally after the bearish U.S. report and on the heels of a better than expected forecast for German economic growth.

Technically the Euro is still rangebound amid confusion by traders. Buying and selling interest appears to be even as the bulls want to buy Euros on speculation of renewed strength in the Euro Zone economy but the bears feel the need to sell because of a dim outlook for the global economy.

The charts indicate impending volatility but the direction of the next move is not clear. A breakout to the upside is likely to be met with selling pressure at 1.3033 to 1.3104. A breakdown through support could trigger a downside acceleration to 1.2605 to 1.2433.

The British Pound received a boost this morning following a better than expected U.K. retail sales report. This rally died, however, short of a breakout above the recent high at 1.5701 and after sentiment shifted away from risky assets.

Technically, the Sterling is trapped between a pair of 50% levels at 1.5560 and 1.5635. Major support is being provided by an uptrending Gann angle from the 1.4229 bottom at 1.5529 today. A close under this angle could trigger a tremendous downslide.

The September Japanese Yen started the day in a potentially bearish position as it tried to build resistance inside of a retracement zone at 1.1692 to 1.1719. At one time today, it looked as if the Yen was readying to breakout below the last swing bottom at 1.1579. This move would’ve changed the daily trend to down.

This currency rallied sharply after the U.S. released a surprisingly bad weekly initial claims report. U.S. equities sold off on the news, triggering a flight to safety rally in the Japanese Yen. Unless this market can regain the retracement zone, look for 1.1805 to get taken out.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Dow Tries to Make Back to Back Gains

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 19 Aug 2010 11:18:00 GMT

The Dow will try to make it back to back up days for the first time since late July today, but first traders have to assess the Weekly Jobs Claims Report. Given that the economic recovery is not on pace, traders will be looking for anything bullish to give them an excuse to go long equities. The low yields in the Treasurys are making equities look attractive.

U.S. stock futures are trading higher, three hours before the opening of the regular session. Stronger retail sales out of the U.K. gave equities a boost a short while ago. The strength may fade, however, as we approach this morning’s Weekly Initial Jobs Data.

According to Briefing.com, the report should show 470K initial claims versus the consensus guess of 475K. Last week the number of new claims was 484K. A number less than the census should help underpin the equity markets. What investors don’t want to see is an increase. This would be a sign that the pace of the economic recovery is continuing to weaken.

Technically the September E-mini S&P 500 backed off its high on Wednesday after testing a minor 50% price level at 1097.00. The tone remained firm, however, based on a positive outlook for the retail sector. The subsequent setback was met by buying overnight.

Clearly the chart indicates that a breakout over 1097.00 is likely to trigger a rally to the .618 retracement level at 1104.25. Let’s get to this level before we decide if the market has enough power to move higher. On the downside, it looks as if longs will throw in the towel under 1083.75, but may run into support at 1082.50 to 1078.50. Be careful selling too far in the hole today.

September Treasury Bonds are trading lower ahead of the jobless claims report. Talk of a T-Bond Bubble may be encouraging some profit taking, but journalists have been calling for a bubble since at least 2008 when the Fed lowered rates to near zero. In my opinion the T-Bond traders got it right – the economy has been weakening and the Fed is likely to keep rates low for the next 12 to 18 months.

Why call it a bubble if investors used sound economic reasoning to go long? I haven’t seen evidence of any wild speculation. Furthermore, the Fed said last week that it was going to buy Treasurys.

Those calling for a T-Bond Bubble better have someplace to put their money for safety. When the consensus began calling for a housing bubble years ago, I can’t recall a single advisor who recommended selling one’s primary residence.

I believe that when the general public buys government debt, they commit to the duration of the instrument. Most like getting the interest check and are happy that at the end of the maturity, they get the face value of the instrument. Regular folks want to know that they will get the principal at maturity. They are not marking the instrument to market. If you “play” the T-Bond market, then you should be worried about a bubble. If you buy and hold T-Bonds, you are usually in the game until the end.

That being said, sure the recent almost vertical rise in September Treasury Bonds is scary, but let the speculators deal with that. The current chart formation suggests that this market is vulnerable to a correction back to 130’01 to 129’03. A break back into this zone should be considered normal, because markets make percentage corrections.

As long as the T-Bonds maintain a higher-top, higher-bottom formation, then look for the trend to continue. As long as the Fed continues to say that the economy is sluggish and interest rates are going to remain low, then look for investors to underpin the market on any breaks.

The September Euro is trading lower overnight. Based on the daily chart, this market has been having trouble regaining the bullish side of an uptrending Gann angle from the 1.1876 bottom. This angle comes in at 1.2936 today. The market will remain in a weak state unless this angle can be regained. Downtrending Gann angle resistance is at 1.2974.

The main trend on the daily chart is down. This trend turned lower when the market crossed the swing bottom at 1.3119 several days ago. A new main bottom has been formed at 1.2732, creating a new range at 1.3334 to 1.2732. We are trading inside of this short-term range right now.

The way I see it, we are in the middle of nowhere at this time. Based on the major range of 1.1876 to 1.3334, the best value area for a possible buy is 1.2605 to 1.2433. From a seller’s perspective, the best area to initiate new shorts is in the retracement range of the 1.3334 to 1.2732 range at 1.3033 to 1.3104.

This being said the best way to play the Euro is to look for the acceleration points or logical prices for stop placement. On the upside, watch for a possible breakout above the Gann angle at 1.2936. A move above this price could trigger an acceleration to the retracement zone at 1.3033 to 1.3104.

Based on the current pattern, the market has yet to form a secondary lower top. The first sell-off turned the main trend down but this move was most likely longs bailing out. This means that fresh shorts may be waiting to enter the market if the price is right.

The buyers are looking for value and the opportunity to go long at a favorable price. From June to August the Euro rallied from 1.1876 to 1.3334. The ideal spot for fresh buyers to be waiting is at the retracement zone at 1.2605 to 1.2433.

Until the market makes its move toward either of these retracement zones, look for choppy sideways action. If you feel the need to trade, the look for acceleration area and go the way of the move until the momentum slows down. This is likely to occur when either a big buyer or big seller shows up inside the retracement zones.

Besides the initial claims report, investors will get a chance to gauge monthly activity with the Philly Fed Manufacturing Index report. At the same time, the Conference Board Leading Indicators Index for July will be released. Both reports will be watch closely because of the recently announced change in the Fed’s view of the economy.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Gold Begins Breakout above Gann Angles

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 19 Aug 2010 01:08:00 GMT

December Gold is currently in a strong position, having broken out above a pair of downtrending angles from the $1270.60 to $1267.50 tops. These angles are at $1228.60 to $1230.50. The move also cleared a retracement zone at $1228.00 and $1215.00. Both of these prices are now new support levels.

December Crude Oil opened lower and took out a key Fibonacci level at 76.45, but heavy selling pressure failed to materialize. The market rallied off its low but still remains down on the day after the EIA reported an 800k drop in crude oil inventories. Analysts were looking for an increase. Prices have stabilized at the mid-session mostly on short-covering.

Technically the close over a 50% level at 77.98 is a sign of higher markets to follow. Now that the fundamentals have changed at least in the short-run, don’t be surprised if the market begins a retracement rally back to 80.22. The key will be breaking out above and sustaining a rally over the upper level at 77.98.

After a sluggish morning session, the September E-mini S&P 500 mounted a strong rally at the mid-session but ran into sellers at a 50% level at 1097.00. A breakout over this level should trigger a rally to the Fibonacci retracement level at 1104.25.

The inability to breakout over 1097.00 and the lower close suggests the market may have more consolidating to do.

The September Japanese Yen is consolidating inside the retracement zone created by the 1.1805 to 1.1579 range. This zone is 1.1692 to 1.1719. If the market can form resistance then look for it to make a run at the swing bottom at 1.1579. Not only will a breakout over this level turn the main trend to down on the daily chart, but it will also confirm last week’s weekly closing price reversal top.

Based on the current chart formation, it looks as if the key will be breaking under and sustaining a move under 1.1692. This scenario would put the market on the bearish side of both the 50% level and an uptrending Gann angle.

The short-term charts indicate that the market may have trouble at 1.1579 to 1.1526 and 1.1515 to 1.1447. Once these areas are cleared, then watch for a possible acceleration to the downside with 1.1294 a potential downside target.

The possibility of an intervention may still be lingering in the air. This speculation fueled last week’s rally, but weak U.S. economic data has prevented the market from following through this week.

The Japanese government and the Bank of Japan may still be considering an intervention, but at first wanted to weaken the Yen through a verbal intervention. At this time it is possible, that government officials and the BoJ are trying to drum up support for an intervention.

Another reason for a rally would be the possibility of a stock market rally. The market is looking good this week and a breakout to the upside could renew interest in the carry trade, a strategy that involves selling the Yen.

Traders should focus on one area of the chart at this time, 1.1719 to 1.1692. A close over the upper level would indicate strength, but a close below the lower level could indicate the start of a sharp decline.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Crude Oil Stabilizes after Surprise Drop in EIA Inventories

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 18 Aug 2010 17:12:00 GMT

December Crude Oil opened lower and took out a key Fibonacci level at 76.45, but heavy selling pressure failed to materialize. The market rallied off its low but still remains down on the day after the EIA reported an 800k drop in crude oil inventories. Analysts were looking for an increase. Prices have stabilized at the mid-session mostly on short-covering.

Technically a higher close will produce a daily reversal bottom. A close over a 50% level at 77.98 will also be a sign of higher markets to follow. Now that the fundamentals have changed at least in the short-run, don’t be surprised if the market begins a retracement rally back to 80.22.

After a sluggish morning session, the September E-mini S&P 500 is mounting a strong rally. The first objective is a 50% level at 1097.00. A breakout over this level should trigger a rally to the Fibonacci retracement level at 1104.25. The September E-mini NASDAQ is also in a position to rally with 1873.00 the next upside objective.

Trading conditions are thin today which may lead to exaggerated moves.

The Dollar is trading mixed at the mid-session. The lack of any fresh economic news is encouraging investors to seek direction from the equity markets. It seems the only market moving with any conviction is the British Pound.

The British Pound erased early session losses and opened better in New York following the release of the Bank of England minutes which showed that the Monetary Policy Committee voted 8 -1 to keep interest rates at historically low levels.

Besides voting to keep rates low, the BoE also voted to maintain its asset-purchase program at 200 billion pounds. The MPC discussed both easing and tightening at its latest meeting before voting overwhelmingly to maintain the status quo.

The recent discussion has been about the U.K. inflation. Some believe that it is too high and not likely to fall back under the BoE’s target rate of 2.0%. Based on the conviction of the BoE members at its last meeting, however, it looks as if investors believe what the central bank is saying about the inflation rate easing back toward the target by 2012.

Technically the British Pound found support early this morning on an uptrending Gann angle from the 1.4229 bottom after piercing a key 50% level at 1.5560. Regaining this level has put the market in a strong position to post a daily closing price reversal today. This pattern suggests the possible start of a 2 to 3 day rally back to 1.5746.

The Australian Dollar is under pressure at the mid-session. The Aussie weakened after a report measuring the number of jobs available for skilled workers fell 0.3 percent in August. The decline in this wage index is a signal that the economy may be cooling, leading to the selling pressure.

Technically, the Aussie may be completing a 50% retracement of the recent short-term decline. A failure between .9039 and .9083 could mean a secondary lower top is forming. This pattern could mean the start of increased selling pressure.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Crude Oil Threatening to Pierce Fibonacci Support Level

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 18 Aug 2010 11:21:00 GMT

December Crude Oil is trading lower overnight. Last night’s API report showing that inventories rose unexpectedly is the catalyst behind this morning’s weakness. Experts were calling for a drop in inventories, but the actual build was 5.87 million barrels. Selling pressure started in Asia and is expected to continue at the U.S. opening.

Trading could turn sideways ahead of this morning’s EIA inventory report which is expected to show a slight rise, but the sell-off is likely to resume unless the EIA report surprises traders. With the global economy showing signs of weakness, oil traders are looking for a drop in demand.

Technically, the December Crude Oil is resting near the .618 retracement level of the 71.50 to 84.45 range. For four days the market has been trying to establish support at 76.45, but with selling pressure building overnight, look for traders to try to push oil through this potential support level.

Stops are likely to be triggered initially, but there may be an acceleration to the downside if the inventory report is bearish. Traders will gain confidence playing the short-side if the fundamentals are on their side.

The September E-mini S&P 500 is trading flat to lower overnight. Last night’s range was inside of Tuesday’s range, indicating that traders are non-committal at this time. Yesterday’s rally was a follow-through move of Monday’s reversal bottom. This pattern usually leads to a 2 to 3 day rally equal to 50% of the last swing down. Yesterday’s up move already completed the first objective so the counter-trend rally may be over.

The direction of the market is likely to be determined early today. Watch for an early test of 1082.50. If this low price holds and support forms, then look for the start of a rally. If this area fails and the market cannot regain it throughout the day, then look for downside pressure to build.

December Gold backed off its high on Tuesday after testing a downtrending Gann angle. In addition, the market closed under a .618 retracement level at $1228.00. The pattern suggests some light profit-taking, but there is still the possibility of heavy selling pressure if the 50% price at $1215.00 fails to hold. Gold traders are likely to take their clues from the equity markets today. Weaker stock prices are likely to drive gold prices higher. If stocks strengthen, then look for gold to make an attempt to test $1215.00.

The September British Pound erased early session losses and is now expected to open better in New York following the release of the Bank of England minutes which showed that the Monetary Policy Committee voted 8 -1 to keep interest rates at historically low levels.

Besides voting to keep rates low, the BoE also voted to maintain its asset-purchase program at 200 billion pounds. The MPC discussed both easing and tightening at its latest meeting before voting overwhelmingly to maintain the status quo.

Inflation is the key matter being discussed in the U.K. at this time, but MPC members found the time to talk about concerns over tight credit conditions, the impact of the government’s proposed budget measures on economic activity, and weaker business surveys that pointed to slowing output growth.

Regarding inflation, the BoE said “the weight of evidence continued to suggest that the margin of spare capacity was likely to bear down on inflation and bring it back to target in the medium term once the impact of temporary factors had worn off.”

The lone dissenter, Andrew Sentance, argued that rates should go up 25 basis points because inflation risks were not temporary and actually was skewed to the upside.

It’s obvious where to the two differ. The central bank sees high inflation as a temporary condition and Mr. Sentence believes it will remain a risk to the economy.

Sentence’s argument that inflation is not a temporary condition is based on the fact that inflation has been above the BoE’s 2% annual target in 41 out of the past 50 months and the government’s planned increase in value added taxes would mean that inflation would stay above target longer than the central bank had previously projected. With the vote to keep rates steady, 8 to 1, it is clear that the other member’s don’t buy his argument and truly believe that inflation will ease back below the 2% target by 2012 without any additional help from the central bank.

If there is truly enough spare capacity to drive inflation lower, then the BoE is likely to be right, but a sudden shift in demand could use up this excess, thereby driving up inflation or at least holding it steady, but above target. In my opinion, the BoE is predicting a slow down in consumer demand, and this cannot be good for the economy.

The inflation data released on Tuesday showed annual consumer inflation slowed to 3.1% in July from 3.2% in June. Although central bank officials acted surprised by the figure, BoE Governor Mervyn King issued a letter reiterating that spare capacity would eventually weigh on prices.

Technically the Sterling has been trying to build a support base at the 50% price level of the 1.5123 to 1.5997 range at 1.5560. Last night this level was pierced but the market found buyers waiting at a long-term uptrending Gann angle at 1.5509 today. Tests of this angle have produced bottoms four times since the main bottom was formed at 1.4229 on May 20. Because of the strength demonstrated by this angle currently and in the past, one has to conclude that a break through this level will trigger a massive acceleration to the downside.

Shortly before the New York opening, the British Pound is trading higher and in a position to post a daily closing price reversal bottom. This formation suggests the possibility of a two to three day rally back at least 50% of the last swing down. This makes 1.5729 an upside target over the short-run.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Friendly Events Fuel Stock Market Rally

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 17 Aug 2010 22:06:00 GMT

Stocks traded sharply higher on Tuesday, driven by both technical and fundamental factors. A combination of friendly events fueled today’s rally which began overnight after European and Asian traders set out to satisfy their appetites for risk by supporting equities. All three major stock indices backed off their highs after reaching key short-term retracement levels.

News that Potash Corp. rejected a buyout from BHP Billiton Ltd helped drive agricultural companies higher on the thought that other companies may be on BHP’s radar now that the original deal fell through. A report showing that retail giant Wal-Mart Stores, Inc. beat earnings estimates also helped drive investors into equities. The news regarding Wal-Mart was a sign of strong consumer spending in the wake of a dismal outlook for the economy.

At least for the time being, investor appetite for risk seems to be stronger than the desire for safety. This morning’s rally was tipped off on Monday when all three major futures indices posted daily closing price reversal bottoms.

Technically, the September E-mini S&P 500 retraced to 1097.00 before finding fresh sellers. The September E-mini NASDAQ reached a 50% level at 1859.00. Finally the Dow had enough upside momentum to reach a 50% price level at 10433. In order to sustain the rally, the indices have to regain this area and attract enough fresh buying to drive them to the .618 retracement level.

The September Japanese Yen was pressured on Tuesday because of the strong rally in the U.S. equity markets. The charts suggest the Yen is trying to form a secondary lower top. The failure at the retracement zone at 1.1692 to 1.1719 is a strong sign that the Dollar/Yen may make another attempt later in the week to confirm last week’s weekly closing price reversal top.

Although the possibility of an intervention by the Bank of Japan and the Japanese government seems to be remote, a strong rally in the equity markets could trigger renewed interest in the carry trade especially if coupled with better than expected U.S. economic data.

The chart pattern says the Japanese Yen is set up for a break. It is now up to investors to show up to sell this rally. Without selling volume, this pattern could fade away like several have over the past few months.

The September British Pound is trying to establish support on a minor 50% price level at 1.5635. Breaking this level could trigger an acceleration to 1.5470. Needless to say, the Sterling is at a critical point on the short-term chart. In addition, there is an uptrending Gann angle at 1.5546. This angle has helped support the rally since May. Watch for a technical bounce up if this angle is tested.

Fundamentally, the British Pound took a jolt early this morning when it was reported that July inflation was lower than expected. This weakness pressured the Sterling all day. A drop in U.K. inflation is a sign that the economy is slowing. This is a concern because it could indicate the possibility of a double-dip recession, plus it comes at a time when the government is reading to apply new austerity measures and higher taxes.

The drop in the inflation rate from 3.2% to 3.1% was the third consecutive month that prices have risen more slowly. The surprise nature of this slow down highlights the difficulty the Bank of England is having in predicting how fast and far it will fall.

The BoE would like to see inflation drop to at least 2%. At this time, prices for energy, clothing and furniture are easing, but the cost of food saw its biggest monthly rise in two years. The difference in these two inflation rates partially demonstrates the power of consumer spending. It seems the consumer has a little more control on his spending for energy and other discretionary consumer goods but is not willing to cutback on his spending for necessities such as food.

Another concern for the BoE at this time is that wages are not keeping pace with overall inflation. This is another factor that could lead to a slow down in consumer spending. With housing prices already falling, the BoE does not want to deal with a serious drop off in consumer spending.

The primary reason for the sell-off in the British Pound today was most likely this growing concern because it means the BoE will have to begin another round of currency-weakening stimulus.

Tuesday’s action suggests that the risk trade is back on but that traders are willing to cherry-pick which currencies are strong and which are weak depending on the economic outlook. This scenario may produce volatility in the marketplace especially for traders who get caught up in the broad fundamentals and fail to pay attention to the details. This is one reason why following only the trade-weighted Dollar Index can get you in trouble.

December Gold penetrated but could not close over a .618 retracement level at $1228.00, indicating impending weakness. At times it looked like a reversal top was forming, but traders were able to prevent this pattern from taking place with light buying into the close. A failure to regain the Fib level could pressure this market back to the 50% level at $1215.00. This price must hold or the market is likely to retrace 50% of the entire $1159.30 to $1231.10 to $1195.20.

Stocks and gold investors are competing for the same Dollar at this time, so a rally in the stock market is likely to be the catalyst which drives the gold market lower over the near-term. If risk is back on, then look for investors to lighten up on their hedge positions in gold.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks Rally as Retail-Giant Wal-Mart Earnings Top Estimates

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 17 Aug 2010 16:14:00 GMT

Stocks are trading sharply higher at the mid-session. A combination of friendly events is fueling today’s rally which began overnight after European and Asian traders set out to satisfy their appetites for risk by supporting equities.

News that Potash Corp. rejected a buyout from BHP Billiton Ltd helped drive agricultural companies higher on the thought that other companies may be in BHP’s radar now that the original deal fell through. A report showing that retail giant Wal-Mart Stores, Inc. beat earnings estimates also helped drive investors into equities. The news regarding Wal-Mart was a sign of strong consumer spending in the wake of a dismal outlook for the economy.

At least for the time being, investor appetite for risk seems to be stronger than the desire for safety. This morning’s rally was tipped off on Monday when all three major futures indices posted daily closing price reversal bottoms.

Technically, the September E-mini S&P 500 is on pace to retrace to 1097.00 before finding fresh sellers. The September E-mini NASDAQ is set up for a retracement rally to 1859.00. Finally the Dow may have enough upside momentum to reach a 50% price level at 10433.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Appetite for Risk Driving U.S. Equity Markets Higher, T-Bonds Lower

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 17 Aug 2010 11:53:00 GMT

At least for the time being, investor appetite for risk seems to be stronger than the desire for safety, driving up U.S. equity markets ahead of the opening. This morning’s possible rally was tipped off yesterday when all three major futures indices posted daily closing price reversal bottoms.

Technically, the September E-mini S&P 500 chart indicates this market has room to retrace to 1097.00 before finding fresh sellers. The September E-mini NASDAQ is set up for a retracement rally to 1859.00. Finally the Dow could begin a retracement to 10433.

September Treasury Bonds failed to follow-through to the upside overnight, leading to some light profit-taking selling pressure this morning. Technically this market is overbought following the almost week-long meteoric rise after the Fed announced last week it was buying Treasury Bonds. Don’t expect a change in trend, but do not be surprised by a healthy retracement to perhaps 130’01.

The U.S. Dollar is under pressure overnight as traders throw their support into the Yen, Euro, Swiss Franc and the commodity-linked currencies. On-going concerns over a slowdown in global growth continue to be the main catalyst behind the selling pressure.

With the Dollar giving back some of its gains from last week, investors are beginning to question if the current weakness is the start of another leg down or simply a retracement of last week’s rally. Traders seem to be a little confused as to which route to take today. On one hand, the rallies in the Japanese Yen and Swiss Franc suggest investors are seeking shelter in lower yielding currencies. On the other hand, the rallies in the Australian Dollar, New Zealand Dollar and Canadian Dollar indicate there is still appetite for risk.

Volatility is likely to increase over the near term as traders will eventually have to decide whether risk is on or risk is off.

The September Japanese Yen is trading flat to higher shortly before the New York session opening. The inability to follow-through to the downside after last week’s weekly closing price reversal top has all but taken the chance of an intervention off the table.

Technically, the Japanese Yen still has a chance to begin another attempt to breakout to the downside however. The overnight strength has created a new swing bottom at 1.1579 which means a breakdown under this level will turn the main trend to down on the daily chart.

Based on the short-term range of 1.1805 to 1.1579, the market has to begin establishing resistance at the 50%/62% retracement zone at 1.1692 to 1.1719 or buying pressure will overcome the selling and this pair will test or exceed the previous swing top at 1.1805.

Although the overnight price action penetrated the high end of this zone, a close under either 1.1719 or even better 1.1692 will be a strong indication that new sellers may have stepped up. This would put the market in a position to post a possible secondary lower top

On Monday the September Euro posted a daily closing price reversal bottom at 1.2732. Last night this reversal bottom was confirmed, setting up the possibility of a short-covering rally to 1.3033 to 1.3103.

Often after a hard sell-off from a major top, the market has a snapback rally to set up a secondary lower top. This occurs because the first break is usually dominated by longs bailing out. So another rally is needed to give traders an opportunity to put on fresh shorts. A rally back to 1.3033 to 1.3103 will give investors an opportunity to do so.

If this rally fails to materialize, then look for the downtrend to resume with an objective of the major retracement zone at 1.2608 to 1.2437.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

December Gold Pressing Fib Retracement Level into Close

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 16 Aug 2010 23:41:00 GMT

December Gold tested but closed under a key Fibonacci retracement level on Monday at $1228.00. Slightly above this level is a pair of downtrending Gann angles at $1230.60 and $1232.50. This setup has the potential to stop the current rally.

Lately gold and stock indices have been competing for the same investment dollar. Today’s closing price reversal bottoms in the stock indices indicate the possibility of the start of a 2 to 3 day retracement rally.

With stocks putting in reversal bottoms and December Gold pressing a key retracement area, don’t be surprised by a short-term break in gold, triggered by a rally in stocks. The set-ups are there for this move to occur, but confirmation is needed to ignite the move.

Technically, the September E-mini S&P 500 is setup for a 2 to 3 day retracement to 1097.00. The September E-mini NASDAQ pattern suggests a near-term retracement to 1859.00.

Traders shrugged off stories of heightened sensitivity in Euro Zone bond markets and drove down the Dollar.

Early in the session the Euro was down on reports that the premium investors pay to hold 10-year Irish and Greek government bonds rather than German Bunds were rising. In addition the cost of insuring their debt against default also increased. The Euro was under pressure early in the session on this news, but by mid-session had turned around to the positive side. The market was able to hold these gains into the close.

Contributing to the turnaround in the Euro were three lackluster U.S. economic reports. This morning’s NY Fed Empire State Manufacturing Index didn’t help the outlook for the economy. The report actually gave off mixed signals since it showed that manufacturing is still expanding, but at a slower pace.

The September Euro also received support from a surprise decline in the NAHB-Housing Market Index. The report showed the index declined to 13 from 14 the month prior. Traders were pricing in an increase to 15.

Technically the Euro posted a daily closing price reversal bottom. Based on the current short-term range of 1.3334 to 1.2732, traders should watch for the start of a 2 to 3 day rally with 50% of this range the next objective at 1.3033. A breakout through 1.2807 is needed to confirm the pattern.

All three commodity-linked currencies showed a little strength on Monday with the Australian and New Zealand Dollar posting closing price reversal bottoms.

The Australian Dollar could be starting a retracement rally to .9039. The New Zealand Dollar retracement target is .7175. Short-term oversold conditions and the return of demand for risk are the primary drivers behind this morning’s developing reversal bottom. Like the Euro, these two currency pairs are not outright buys until confirmed. Otherwise the markets may just drift lower. The Australian Dollar’s reversal will be confirmed after a rally through .8993, the Kiwi, after a breakout through .7102.

Risk aversion helped strengthen the Japanese Yen despite the news that Japan’s gross domestic product slowed during the second quarter.

The weakness in the Dollar/Yen also meant that last week’s weekly closing price reversal bottom was not confirmed. This means that traders are once again favoring safety over the possibility of an intervention by the Japanese government and the Bank of Japan.

Traders now believe that an intervention will not be effective without the cooperation of other central banks which seems remote at this time since many are dealing with too many problems of their own without having to worry about Japan.

Continue to look for the possibility of extreme volatility. The threat of a Japanese intervention will still linger until government officials put it to death. In addition, concerns about sovereign debt of peripheral Euro Zone members have begun rising again. At a minimum this should limit gains in the Euro, but could lead to fresh selling pressure.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

December Gold Tests Fib Retracement Level

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 16 Aug 2010 18:47:00 GMT

The weaker Dollar and struggling equity markets helped trigger an early session rally in December Gold. After finally breaking through a key 50% level at $1215.00 last week, gold has been underpinned by expectations of a weakening equity market. This morning, buyers drove the market into the next upside objective at $1228.00 before light profit-taking pushed it back a couple of bucks.

As long as equities remain under pressure, there should be strong support for gold since both markets are competing for the same investment Dollar.

Treasury yields continue to fall, driving Treasury Bonds and Treasury Notes sharply higher. Technically these markets have reached overbought levels but the underlying fundamentals remain too strong to attract any selling pressure.

This morning’s NY Fed Empire State Manufacturing Index didn’t help the outlook for the economy. The report actually gave off mixed signals since it showed that manufacturing is still expanding, but at a slower pace.

The Treasuries also received support from a surprise decline in the NAHB-Housing Market Index. The report showed the index declined to 13 from 14 the month prior. Traders were pricing in an increase to 15.

Traders are shrugging off stories of heightened sensitivity in Euro Zone bond markets and are driving down the Dollar at the mid-session.

Early in the session the Euro was down on reports that the premium investors pay to hold 10-year Irish and Greek government bonds rather than German Bunds are rising. In addition the cost of insuring their debt against default also increased. The Euro was under pressure early in the session on this news, but has since turned around to the positive side.

Technically the current September Euro chart formation suggests a possible closing price reversal bottom. Based on the current short-term range of 1.3334 to 1.2732, traders should watch for the start of a 2 to 3 day rally with 50% of this range the next objective. This minimum retracement objective is 1.3033.

All three commodity-linked currencies are also showing signs of potential reversal bottoms. The Australian Dollar could be starting a retracement rally to .9039. The New Zealand Dollar retracement target is .7175. Short-term oversold conditions and the return of demand for risk are the primary drivers behind this morning’s developing reversal bottom.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks Down, Bonds Up as Risk Aversion Creeps into Markets

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 16 Aug 2010 11:57:00 GMT

U.S. Equity markets are under pressure this morning as sellers showed up after Japan reported a weak GDP figure. Treasury Bonds are trading higher in response to the possibility of a weaker global economy.

Talk is circulating that the Fed may have inadvertently cast a pall on the market last week when it decided to shore up its balance sheet by moving funds from mortgages to Treasury Bonds. This may have sent a message to traders that the central bank is making room for more stimuli. Its action in no way injected any confidence into the fragile markets.

Today investors will have three reports to digest to help determine the outlook for the economy. These reports should help shed a little light on the progress of the recovery. Even if they turn out better than expected, the economy is still facing a huge challenge since all indications are showing that economic activity as stalled.

The NY Fed Empire Manufacturing Index is expected to show that manufacturing activities expanded in August to 7.50 from 5.10 reported in July. This report should be no big deal since manufacturing has been steady.

Net Long-Term TIC Flows are expected to show a surplus. This reports measures foreign investment flowing into the U.S. This report often shows a surplus, but the figure usually offsets the trade balance deficit. In fact some say it is reported to cover-up the trade deficit. Although there is a surplus at this time, an economic slowdown in the U.S. is likely to cause foreigners to curtail their interest in U.S. investments.

Finally the NAHB-Housing Market Index gets reported at 9am CDT. This report should be up from the June figure, but this increase could be deceiving since housing took a beating in June following the ending of the tax rebate program.

So basically, these reports aren’t expected to trigger much interest following their initial releases. The focus will remain on the longer-term picture and an interpretation of the Fed’s next move.

The U.S. Dollar is trading mixed against most major Forex markets, posting gains against the commodity-linked currencies and losses against the Euro, Yen and Swiss Franc.

Early in the session, the Dollar was trading a little firmer, but was unable to hold gains after Japanese second-quarter gross domestic product data showed the nation’s economy slowed to a crawl. The sluggish GDP report helped China move up to become the world’s second largest economy.

The reported slow down in the Japanese economy also may have strengthened the government’s case for a weaker Yen. For weeks the government has warned that the high price of the Yen may be damaging demand for Japanese exports, thus hurting the economy.

At the close on Friday, the Yen posted a reversal bottom for the week. This was an indication that traders were looking for a possible intervention. The lack of follow-through to the upside means this reversal bottom has not been confirmed.

The main driver in the Dollar/Yen market the past few trading sessions has been the anticipated moves by the Japanese government and the Bank of Japan. So far all the rhetoric has amounted to a “verbal intervention”, but this has been enough to scare the weaker shorts into covering their positions.

This week Prime Minister Naoto Kan and central bank Governor Masaaki Shirakawa meet to discuss the value of the Yen and its effect on the economy. Look for increased volatility in the Japanese Yen as traders try to forecast the government’s and BoJ’s next move.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

“Hindenberg Omen” Could Be Fueling Stock Market Fears

jhyerczyk@yahoo.com (James A. Hyerczyk) — Fri, 13 Aug 2010 20:45:00 GMT

The two-day pause in the break in the equity markets made me search for some missing factor which may be lurking in the charts. At this time, the break taking place from the 1127.75 level in the September E-mini S&P 500 appears to be a normal 50 – 62% correction of the 1002.75 to 1127.75 range. This makes 1065.25 to 1050.50 the next potential downside target and an area which could make stocks attractive to buyers.

Something struck me as interesting about the developing pattern because the market has a tendency to trade in a range once it makes its retracement as buyers and sellers jockey for position. In this case the market is holding above this area almost in the same manner that a boxer would hold up the head of his opponent before landing a knock-out punch.

After browsing the internet this afternoon I came across an AOLNews.com story written by Carl Franzen about the “Hindenberg Omen” which he described as “an obscure technical analysis tool that proponents believe is uncannily effective at signaling the necessary preconditions, there is at least a 25 percent chance that such a significant drop is nigh.”

Given I am at a loss for words after describing the same pessimistic outlook for the economy several times this week and predicting the correction into the retracement area, I believe I am going to take some time this week to investigate the “Hindenberg Omen” in combination with some of the other Gann tools that I typically use to analyze a market.

That being said, hopefully I will have something interesting to contribute to the analysis report on Monday morning. At this time I continue to believe that stocks are not going to move higher until 50% corrections at a minimum take place in all three major indices. In addition to reaching this level on the daily chart, this test of the retracement zone is very critical to the structure on the weekly chart since it sets up the possibility of a secondary higher bottom.

I have said many times before that the first rally from a major bottom is most likely short-covering and that the real buyers step in once the market corrects the first leg up. Well we are approaching this level at this time so it will be interesting to see if buyers show up once the retracement is complete.

My gut feeling is that next week will be a very volatile market. I get this feeling from my growing concerns about what will happen if the Japanese government intervenes. Will it be like mixing an acid with a base? I’m not sure, but if it intervenes in a big way then I’m not sure stock traders will know what to do. Based on how investors have reacted to sell-offs in the Yen before, stocks could rise substantially. But this current weakness has been based on the poor outlook for the economy so there is a chance that stocks may do the opposite and break sharply following an intervention. Either way look for an expansion of volatility.

The U.S. Dollar finished the week sharply higher after posting gains against all the major currencies. The catalyst behind this week’s strength was the action by the Fed to stabilize its balance sheet by shifting assets from mortgages to long-term debt. This sent a signal to already worried investors that the Fed was making room for the possibility of a prolonged downturn in the U.S. economy. Investors sought safety in the Greenback on concerns that the slowdown in the U.S. economy may soon trigger a halt in the global economic recovery.

As pessimism soared regarding the outlook for the strength in the global economy, investors moved funds into the Japanese Yen in the typical flight-to-quality fashion, but a few comments from the Japanese government, much stronger than the usual “verbal intervention” rhetoric, caused investors to scramble out of the Yen as the threat of an actual intervention began to be taken more seriously. After reaching a 15-year low earlier in the week, the Dollar/Yen rallied as the fear of an intervention trumped the desire for safety.

The Japanese Yen finished lower and in the process posted a weekly closing price reversal top. This formation, once confirmed by a follow-through rally next week, often leads to the start of a 2 to 3 week retracement to a major 50% level, currently identified as 1.1176.

The current two-day break in the Yen has most likely been a reaction to the “verbal intervention” by the Japanese government earlier this week. Some traders feel the government will intervene at this time, but doubts still linger about its effectiveness.

According to the Bank of Japan minutes from the July 14-15 meeting published overnight, the BoJ is closely monitoring the effect of a strong Yen and falling stock prices on the economy. If one interprets this to mean that the BoJ is seriously considering an intervention at this time, then this news will act as the catalyst to drive the Japanese Yen lower.

Throughout the entire financial crisis the Dollar and the Yen have both benefitted from investors’ unwillingness to hold on to risky assets. Most of the rally in the Yen has been traders seeking shelter in safe-haven assets. The possibility of a rally in the Dollar/Yen exists at this time because speculators feel the Japanese government will intervene in order to protect the interest of its exporters. One key to this rally taking place will be whether a stock market break will trigger a flight-to-safety rally, thereby limiting gains in the Yen following an intervention. In other words, if equities break hard, will the news of an intervention be enough to counter-act the demand for the lower risk Japanese Yen. If not, then the Yen seems destined to move higher.

The Euro closed sharply lower for the week. This currency pair accelerated to the downside following a change in trend earlier in the week when the market crossed a swing bottom at 1.3119. Downside momentum is building which could drive the Euro into a major retracement zone at 1.2605 to 1.2433.

Although recent economic data has suggested a developing recovery in the Euro Zone economy, some traders feel that this is backward thinking since the reports are based on stale data. Going forward, investors remain skeptical about future growth especially if a slowdown in the U.S. economy spreads globally.

The British Pound finished the week lower after finding resistance at a .618 retracement level at 1.5967. Once the rally stalled and buyers became scarce, the trend easily turned down on the daily chart when a swing bottom was crossed at 1.5819.

The downside move accelerated earlier in the week after the Bank of England lowered its outlook for growth. This added to the concerns that the implementation of new austerity measures and higher taxes will tie up the economy and possibly trigger a double-dip recession. Further adding to the weakness was a report that U.K. home prices fell for the first time since July 2009, indicating that there is more supply than demand. Tight credit and employment worries have kept many potential British homebuyers on the sidelines.

The strong rally in the Dollar was the story this week, but next week, the focus will shift to the Japanese Yen. Shorts are nervous about whether the Japanese government will intervene and may begin to panic as the government debates what to do about the high priced Yen. The longer the government takes to make a decision, the higher the Dollar/Yen may rally, before moving sharply depending on what the decision turns out to be. Either way one looks at it, the Yen is set up for a volatile week.

Even if the Japanese government intervenes, many investors feel that hedge funds and institutions will treat this as a buying opportunity following a sell-off. Some traders feel that no matter what the government tries to do, a weakening global economy will eventually overcome the benefits of an intervention. This is the primary reason why Japanese officials are taking their time before taking action. It doesn’t make sense to flood the market with Yen if it is only going to be used to set up more selling opportunities.

The huge rally in the Dollar Index, following a test of a Fibonacci retracement level at 80.45, could continue next week if the Greenback is treated as a safe-haven currency. The charts indicate that this market could rally to 84.69 before finding any solid selling pressure.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

U.S. Equities Trading Flat to Better into Close

jhyerczyk@yahoo.com (James A. Hyerczyk) — Fri, 13 Aug 2010 16:15:00 GMT

U.S. stock index futures remain rangebound into the close, hovering between flat and better for the day. Stocks have traded mostly higher on Friday after U.S. retail sales and consumer prices rose in July.

Before the opening, U.S. retailers reported increased sales of 0.4% in July. This was the first increase after two consecutive decreases, and could’ve been caused by early back-to-school shopping. The Consumer Price Index rose 0.3% in July, the largest gain since August 2009, according to the Labor Department. Later in the morning, Michigan Consumer Sentiment was reported better than expected. The index rose to 69.6 versus a guess of 67.0. The better readings for these three reports helped ease concerns about the economy, thereby leading to a more stabilized trade in the equity markets.

The September E-mini S&P 500 is trading slightly better into the last 30 minutes of trading. The daily chart indicates that this market has not completed its 50% retracement to 1065.25, which may continue to draw the market lower. A failure to reach this level may be enough to trigger a short-covering rally back to 1099.00.

Nearby September Treasury Bonds reached the 132 level for the first time since January 2009. The strong move puts the T-Bonds at the high for the week after the Fed triggered a new rally by shifting assets from mortgages to long-term treasuries on its balance sheet. T-Bonds remain strong despite better news regarding retail sales, consumer prices and sentiment. This reflects just how bad investors view the state of the economy.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks Trading Lower Ahead of Key U.S. Economic Reports

jhyerczyk@yahoo.com (James A. Hyerczyk) — Fri, 13 Aug 2010 11:15:00 GMT

Overnight stock indices enjoyed a brief rally following stronger than expected German GDP and a report showing a rise in New Zealand retail sales, but the markets could not hold on to their gains as investor focus shifted back to the U.S. economic reports due out later this morning.

Earlier in the session it looked as if trader sentiment was shifting back toward risk as equities traded higher while the Dollar weakened. Demand for higher risk assets made it look as if the tone of the day was turning bullish for commodities and stocks. This outlook shifted, however, when the Euro turned negative, taking equity prices with it.

It now appears that the optimism created early in the session is gone and investors are reverting to the pessimism about the global economy that has influenced the trading action since Tuesday when the Fed took action to loosen its monetary policy.

Using the September S&P 500 as our bogie, traders should look for a steady to weaker opening based on the current conditions. The charts indicate that this market still has the time and the room to complete a 50% retracement of the rally from 1002.75 to 1127.75 at 1065.25. Additional support may come in at an uptrending Gann angle from the 1002.75 bottom at 1058.75. If both of these levels fail to hold, then look for a test of the Fib retracement level at 1050.50.

At this time I don’t have a grasp on the expected volatility for today so traders will have to monitor this when the market approaches each of the aforementioned levels. In addition to the volatility, traders should also watch the order flow to see if a buyer emerges.

September Treasury Bonds extended their overnight gains when the Euro and equities weakened. Earlier this week the Fed set in motion the current up leg when it announced it would maintain its balance sheet buy shifting resources from mortgages to Treasury Bonds. Additional support for this market could also come from flight-to-safety buying if equities weaken substantially during the day session.

December Gold is trading higher although it appears investors are on the sidelines at this time waiting for the other markets to settle on a theme for the day. Yesterday this market broke a pair of downtrending angles, triggering a surge to a key 50% level at $1215.00. The close over this level suggests a bullish tone is developing which could send this market to the next upside target at $1228.00.

The key to the gold market today will be the direction of the stock market. Since equity and gold traders are competing for the same investment dollar, a break in the stock market could send gold soaring. On the other hand, if stocks find support in the identified areas, gold could begin a profit-taking break.

The September Euro is up this morning following a four-day setback which saw the currency drop from its highest level since late April. After reaching a low at 1.2780 on Thursday, the Euro has recovered slightly from this level and is now resting on an uptrending Gann angle at 1.2856.

This angle is a key balancing point and must hold in order to trigger the start of a short-covering rally back to 1.3057. A failure to hold this potential support angle could trigger further weakness which will eventually lead to a decline to a major 50% level at 1.2605.

Overnight the Euro received some support following the release of a report which showed the German economy grew at the fastest pace in two decades. This news helped underpin the market, leading to speculation that Europe is on a path to recovery.

Germany’s gross domestic product rose 2.2 percent in the second quarter from the first quarter. This growth rate was higher than analyst estimates of 1.3 percent and represented the fastest pace since 1991. The news helped trigger some light buying and short-covering, but gains may have been limited because this news is backward looking. At this time, traders are concerned about future economic growth.

The September Japanese Yen is gaining back some of its losses from the last two days, but is still in a position to post a weekly closing price reversal top. Last week the Japanese Yen closed at 1.1695, but after reaching a 15-year high this week, broke, putting it in a position today to finish lower for the week. A closing price reversal top once confirmed by follow-through selling often leads to the start of a 2 to 3 week correction which culminates at a major 50% price level. In this case, the potential downside target is 1.1176. A failure to close lower this week sets up the Dollar/Yen for further upside action next week.

The current two-day break in the September Japanese Yen has most likely been a reaction to the “verbal intervention” by the Japanese government earlier this week. Some traders feel the government will intervene at this time, but doubts still linger about its effectiveness.

According to the Bank of Japan minutes from the July 14-15 meeting published overnight, the BoJ is closely monitoring the effect of a strong Yen and falling stock prices on the economy. If one interprets this to mean that the BoJ is seriously considering an intervention at this time, then this news will act as the catalyst to drive the Yen sharply lower.

Today traders will get a chance to react to a series of U.S. economic reports. The key reports which should dictate the tone for the day are the CPI and Retail Sales. The CPI report is expected to show an increase of 0.1%. A negative number is likely to pressure stocks and send T-Bonds higher. Retail Sales are called 0.5% better. Like the CPI, a lower number will be bearish for stocks.

Later in the morning, the Michigan Sentiment report is expected to show a small decline. This report is expected to reflect the growing pessimism in the economy over jobs and housing. Business Inventories may show a slight rise.
Traders should watch the Euro and the asset-linked currencies for clues as to the stock market’s direction. Look for equities to rally if the Euro turns higher and the Australian and New Zealand Dollars turn positive.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

S&P 500 Finishes Lower; Chart Indicates Test of 1065.25 Likely

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 12 Aug 2010 20:45:00 GMT

The September E-mini S&P finished lower on Thursday. Although the low of the session was reached near the opening, buyers failed to produce enough interest to drive this market higher into the close. With the fundamental news still supporting a down slide, today’s early rally was most likely triggered by oversold short-term conditions.

Shortly after the release of slightly higher than expected initial claims data, the September E-mini S&P 500 sold off and tested 1070.50. The subsequent rally from this level stopped at 1084.50, forming an intraday range of 1070.50 to 1084.50. This range has created a retracement zone at 1077.50 to 1075.75. This area held as support during the latter half of the day but the market was unable to generate much buying interest into the close.

A failure to hold the retracement zone could trigger further downside momentum, fueling a possible break into the first main downside target at 1065.25. The downside retracement zone which has to hold on the daily charts is 1065.25 to 1050.50. Combined with oversold indicators, watch for a possible technical bounce if this zone is tested over the near-term.

December Gold surged to the upside as expected. After breaking through a pair of downtrending angles this morning, upside momentum was building which was underpinning the market. The strong rally also took out stops a little over a key 50% price level at $1215.00, indicating that the next target is now $1228.00.

With gold and equities competing for the same investment Dollar, continue to look for more upside if stocks weaken into the close.

September Treasury Bonds finished lower despite the rise in the initial claims number. The inability to break the equity markets hard may have given traders an excuse to take profits after a strong performance earlier in the week. Today’s action should in no way be interpreted as a sign of weakness. The Fed’s action earlier in the week is a strong sign that the economic recovery is being threatened which means yields should continue to decline.

The U.S. Dollar continued to mount its strong recovery against the major currencies on Thursday. The Dollar Index rose sharply, led primarily by a strong gain in the Dollar/Yen and reasonable advances against the commodity-linked currencies.

The weekly Dollar Index chart is in a position to post its strongest weekly gain since early May. The current rally was set up when the index held the .618 retracement level of the entire November to June rally from 75.03 to 89.22. Based on the short-term range of 89.22 to 80.17, look for this current rally to advance to perhaps 84.69 over the near-term.

The U.S. Dollar finished higher versus the Japanese Yen after Japanese Prime Minister Kan voiced his strong opinion about the recent movement in the Forex markets.

In what amounts to be a form of “verbal intervention”, Kan called the recent swings in the currency “rough”, and said they “are a little too rapid”. These are the strongest comments from the Japanese government which usually only says it is concerned about the movement in the currency and excessive volatility. Some traders believe the strong language used by Kan is a scare tactic which only represents an attempt to limit gains in the Yen and in no way should be interpreted as a precursor to an actual intervention.

Some traders rushed out to sell the Yen based on the comments, but the majority of market participants are said to believe that an intervention is unlikely for mostly logistic reasons. The likelihood of an intervention is small because they seldom work and the size needed to actually have an influence on the market would require the cooperation of the U.S. and other key central bank players.

Some Forex traders also believe that the recent rally in the Yen has been orderly and based on sound economic reasons. As long as the currency doesn’t swing violently or is influenced by excessive speculation, the chance of the Japanese government garnering support from other nations for an intervention remains remote.

The concerns voiced by Japanese officials are not without merit however. Their primary concern at this time is to protect the economy. By expressing strong opinions which may weaken the Yen, the government is doing its best to protect Japan’s export driven economy.

Another reason why an intervention may not work at this time is because the desire to buy the Yen is being triggered by safe-haven demand because of fear that the global economic recovery may be stalling. Declines in the Euro Zone and U.S. economies could fuel worries that the world’s economy is headed toward a double-dip recession. The action by the Fed earlier in the week has contributed to this growing pessimism. If a slowdown is confirmed, then investors may begin to buy the Yen more aggressively.

Technically, the September Japanese Yen rallied to a 15-year high on Wednesday before sellers stepped in to trigger a profit-taking break. The follow-through break overnight helped form a minor top at 1.1805, but failed to garner enough upside momentum to trigger a clean closing price reversal top.

The strong break and subsequent follow-through, however, has put the Yen in a position to post a weekly closing price reversal. The key number to watch is last Friday’s close at 1.1695. The Yen closed below this number today, but a close under this level on Friday will be a strong indication that this market is gearing up for a 2 to 3 week retracement.

Trading may get volatile overnight and during Friday’s day session because of the struggle between fundamental and news driven traders who believe a move by the Japanese government to weaken the Yen is inevitable. These traders may get support from technical traders who believe that the Yen is overbought, but trend traders may prevail if demand for risky assets continues to decline, triggering an extension of the flight-to-quality rally.

The importance of this developing weekly closing price reversal in the September Japanese Yen cannot be overemphasized at this point. This type of pattern has been known to generate 50% retracements over a 2 to 3 week period which means that a correction to 1.1176 is possible over the short-run. Once again keep the focus on how this market behaves at 1.1695 tomorrow. The action at this level will dictate how serious traders are about turning the Yen around and could offer clues as to what the Japanese government’s next move is going to be.

The Greenback closed up against the commodity-linked currencies, extending it winning streak versus the Australian and New Zealand Dollars. Fears of a global economic slowdown fueled by this morning’s unexpected rise in unemployment claims, pressured equities which helped curtail investor demand for risky assets.

Some of the weakness in the Aussie was triggered last night after the Australian unemployment rate unexpectedly rose to 5.3 percent in July, compared to the median forecast of 5.1 percent. Further downside action was fueled by the U.S. Weekly Initial Claims Report which showed an increase of 2,000. This number pegged total claims at 484,000, the highest level since mid-February.

Technically, the Kiwi and Aussie are slightly oversold on the short-term charts, but the daily charts indicate further downside action is likely.

The New Zealand Dollar is nearing an uptrending Gann angle at .7048 which could produce a technical bounce, but ultimately downside momentum is likely to pressure this market into a 50% level at .6977.

The Australian Dollar broke an uptrending Gann angle this morning, triggering stops. Look for an acceleration to the downside if the late July swing bottom at .8904 is violated. Although its primary downside target of .8644 is pretty far-off at this time. This pattern should not be taken lightly since it suggests that a major fundamental development may take place which drives this market sharply lower over the near-term. A combination of an uptrending Gann angle and the 50% level of .8644 suggest that this price may be tested on August 13th. Bad news from China may be the catalyst which triggers a free fall.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Short-term Oversold Conditions Likely Holding S&P Rangebound

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 12 Aug 2010 16:15:00 GMT

The September E-mini S&P has been trading rangebound since posting a day session bottom on the opening at 1070.50. With the fundamental news still supporting a down slide, this morning’s rally was most likely triggered by oversold short-term conditions.

Shortly after the release of slightly higher than expected initial claims data, the September E-mini S&P 500 sold off and tested 1070.50. The subsequent rally from this level stopped at 1084.50, forming an intraday range of 1070.50 to 1084.50. This range has created a retracement zone at 1077.50 to 1075.75. If this area can hold as support during the latter half of the day then look for a short-covering rally into the close.

A failure to hold the retracement zone could trigger further downside momentum, fueling a possible break into the first main downside target at 1065.25. The downside retracement zone which has to hold on the daily charts is 1065.25 to 1050.50. Combined with oversold indicators, watch for a possible technical bounce if this zone is tested over the near-term.

December Gold surged to the upside as expected. After breaking through a pair of downtrending angles this morning, upside momentum was building which was underpinning the market. The strong rally also took out stops a little over a key 50% price level at $1215.00, indicating that the next target is now $1228.00.

With gold and equities competing for the same investment Dollar, continue to look for more upside if stocks weaken into the close.

The Greenback is up against the commodity-linked currencies, extending it winning streak versus the Australian and New Zealand Dollars. Fears of a global economic slowdown fueled by this morning’s unexpected rise in unemployment claims, pressured equities which helped curtail investor demand for risky assets.

Some of the weakness in the Aussie was triggered last night after the Australian unemployment rate unexpectedly rose to 5.3 percent in July, compared to the median forecast of 5.1 percent. Further downside action was fueled by the U.S. Weekly Initial Claims Report which showed an increase of 2,000. This number pegged total claims at 484,000, the highest level since mid-February.

Technically, the Kiwi and Aussie are slightly oversold on the short-term charts, but the daily charts indicate further downside action is likely.

The New Zealand Dollar is nearing an uptrending Gann angle at .7048 which could produce a technical bounce, but ultimately downside momentum is likely to pressure this market into a 50% level at .6977.

The Australian Dollar broke an uptrending Gann angle this morning, triggering stops. Look for an acceleration to the downside if the late July swing bottom at .8904 is violated. Although its primary downside target of .8644 is pretty far-off at this time. This pattern should not be taken likely since it suggests that a major fundamental development may take place which drives this market sharply lower over the near-term. A combination of an uptrending Gann angle and the 50% level of .8644 suggest that this price may be tested on August 13th. Bad news from China may be the catalyst which triggers a free fall.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

U.S. Equity Markets Bracing for Reaction to Cisco News

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 12 Aug 2010 11:15:00 GMT

U.S. stock index futures are trading lower in the pre-market. Although the indices sold off last night, they did mount a recovery from the lows, but traders are still skeptical about how the markets will react to the news that Cisco’s sales forecast missed analysts’ estimates when U.S. markets open later this morning.

Investors are asking themselves this morning whether the news from Cisco means the technology rally has been derailed. Cisco’s sales miss comes on the heels of research reports calling for a slowdown in spending by global companies on information technology.

Weakness in the equity markets this morning seems to be hinging on how the market interprets the comments from Cisco’s Chief Executive Officer John Chambers. The CEO said the company was seeing “unusual uncertainty” and getting “mixed signals” about the health of the economy.

Technically the September E-mini S&P is nearing its first downside objective at 1065.25. The September E-mini NASDAQ which could take the brunt of the selling pressure this morning has an objective at 1782.25 and the Dow futures market is set up for a short-term break to 10096.

The Treasury markets are flat overnight in limited trading activity. Traders seem to be waiting for this morning’s weekly initial claims report before taking a side. Pre-report guesses call for 465K versus 479K from last week.

Although this report is expected to trigger movement in the market, don’t expect the trend to change because of what the Fed did earlier in the week. A higher than expected number should trigger a further rally in the T-Bonds and T-Notes. A lower than expected number is likely to trigger a position evening break but losses should be limited by fresh demand. The size and direction of the moves in both of these markets will also be dictated by the activity in the equity markets. A sharp break in the equity markets should trigger more flight-to-safety buying.

The December Gold market remains a mystery. My expectations are for gold to mount a strong rally if equity markets continue to deteriorate. This stems from my thinking that gold and stocks are competing for the same investment dollar.

In early morning trading, December Gold is trading on the bullside of a pair of downtrending Gann angles. This move suggests further upside action is forthcoming. The first obstacle will be a major 50% level at $1215.00. Once this area is penetrated with conviction then look for a further rally to the .618 level at $1228.00. If buyers don’t begin to show up, longs may throw in the towel, triggering a correction back to $1186.30.

The U.S. Dollar is trading slightly better against the Japanese Yen after Japanese Prime Minister Kan voiced his strong opinion about the recent movement in the Forex markets.

In what amounts to be a form of “verbal intervention”, Kan called the recent swings in the currency “rough”, and said they “are a little too rapid”. These are the strongest comments from the Japanese government which usually only says it is concerned about the movement in the currency and excessive volatility. Some traders believe the strong language used by Kan is a scare tactic which only represents an attempt to limit gains in the Yen and in no way should be interpreted as a precursor to an actual intervention.

Some traders rushed out to sell the Yen based on the comments, but the majority of market participants are said to believe that an intervention is unlikely for mostly logistic reasons. The likelihood of an intervention is small because they seldom work and the size needed to actually have an influence on the market would require the cooperation of the U.S. and other key central bank players.

Some Forex traders also believe that the recent rally in the Yen has been orderly and based on sound economic reasons. As long as the currency doesn’t swing violently or is influenced by excessive speculation, the chance of the Japanese government garnering support from other nations for an intervention remains remote.

The concerns voiced by Japanese officials are not without merit however. Their primary concern at this time is to protect the economy. By expressing strong opinions which may weaken the Yen, the government is doing its best to protect Japan’s export driven economy.

Another reason why an intervention may not work at this time is because the desire to buy the Yen is being triggered by safe-haven demand because of fear that the global economic recovery may be stalling. Declines in the Euro Zone and U.S. economies could fuel worries that the world’s economy is headed toward a double-dip recession. The action by the Fed earlier in the week has contributed to this growing pessimism. If a slowdown is confirmed, then investors may begin to buy the Yen more aggressively.

Technically, the Japanese Yen rose to a 15-year high on Wednesday before sellers stepped in to trigger a profit-taking break into the close. The follow-through weakness overnight helped form a minor top at 1.1805, but failed to garner enough downside momentum to trigger a clean closing price reversal top.

Yesterday’s break and subsequent follow-through, however, has put the Yen in a position to post a weekly closing price reversal. The key number to watch is last Friday’s close at 1.1695. This price level may act as a pivot today with choppy two-sided trading on both sides of it, but a close under this level on Friday will be a strong indication that this market is gearing up for a 2 to 3 week retracement.

Trading may get volatile over the next two days because of the struggle between fundamental and news driven traders who believe a move by the Japanese government to weaken the Yen is inevitable. These traders may get support from technical traders who believe that the Yen is overbought, but trend traders may prevail if demand for risky assets continues to decline, triggering an extension of the flight-to-quality rally.

The tone in the market today is likely to be set by investor interpretation of the Cisco data. With short-term conditions oversold in the currencies and equities, don’t be surprised by a strong short-covering rally at some point today. Watch the Japanese Yen carefully. If the Yen begins to weaken, then look for buyers to step into the equities.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Global Recovery Fears Pressure U.S. Stock Indices

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 11 Aug 2010 20:45:00 GMT

Weak economic reports from China ignited a sell-off in the equity markets on Wednesday but the embers were burning well ahead of the release of reports showing a decline in Chinese industrial output and weak retail sales.

The Fed most likely triggered the pessimistic outlook for the global economy on Tuesday when it said in its policy statement that it expects prolonged weakness in the economy and loosened its monetary policy by shifting assets from mortgages to long-term debt in order to keep its balance sheet from expanding.

U.S. stocks are were down sharply, threatening to take out key bottoms formed less than two weeks ago. Concerns about a worldwide economic slowdown were the main catalyst which drove down demand for higher risk assets.

With both the U.S. and Chinese economies critical to the global economy, many investors are beginning to worry about the world’s growth prospects.

Last night the U.K. also contributed to the equity market weakness after the Bank of England lowered its growth outlook. With new austerity measures ready to kick in along with higher taxes, investors are worried about the strength of the British economic recovery.

Stocks lost more ground early Wednesday morning after the U.S. said its trade deficit widened to $49.9 billion in June, more than many analysts had anticipated. This news caused some experts to revise downward second-quarter growth.

After seven days of rangebound trading, the September E-mini finally broke out of its range to the downside. This type of pattern usually indicates impending volatility which we saw on Wednesday. If volatility continues to expand, then look for the market swings to become exaggerated.

Technically this market broke through a 50%/uptrending Gann angle combination which triggered stops into the mid-1090’s. So far this index is holding a swing bottom at 1083.50, but downside momentum is building which could see this level taken out. This would change the main trend to down. Ultimately, the E-mini is set up for a minimum correction to a 50% level at 1065.25.

All of the commodity-linked currencies were down hard on Wednesday. The Australian Dollar was down the most because of its strong link to China. Downside momentum is building in this market which could trigger a test of the last main bottom at .8904. Ultimately, this market seems destined to test a major 50% price level at .8644.

U.S. Treasury debt continued their acceleration to the upside as money fled equities for the safety of U.S. debt. The action by the Fed to buy Treasury Bonds was partially responsible for Wednesday’s rally. The Treasury complex continues to be the best indicator for the state of the U.S. economy. As long as the economy continues to cool, expect more upside pressure.

December Gold continues to be the most interesting market. Investors are trying to decide whether to follow the Dollar, deflation or equities. I believe that gold and equities are competing for the same Dollar so I’m expecting more upside action. Gold has been sitting in a range for a few days which means impending volatility. This market is either going to explode to the upside through $1215.00 or correct back to $1186.30.

The flight to safety rally sent investors into the Japanese Yen. Buyers stepped in however after the Yen reached a 15 year low. Talk is circulating that the Japanese government may attempt to intervene. Its biggest concern at this time is that a rise in the Yen will hurt exports. This expectation coupled with talk of lower demand from China and the U.S. will hurt the economic recovery.

The British Pound was down over 1% on Wednesday as worries about a slowdown in the economy forced investors to wonder if the U.K. economic recovery was slowing down.

Overnight the Bank of England lowered its forecast for growth expectations in its quarterly inflation report. The BoE cited declining confidence, tight credit conditions and the government’s planned austerity measures as the main reasons for the reduction in its outlook. In May, the central bank forecast about 3.6% growth. The revised number is 3%.

Although the U.K. Gross Domestic Product was more than expected during the second quarter, a key central bank official indicated that the total growth for the year would most likely average out.

In a statement, BoE Governor Mervyn King said, “business and consumer sentiment have shown signs of softening, measure of financial fragility remain elevated, and there is great uncertainty about the outlook for both the United States and our most important trading partner, the euro area.”

This statement cast on pall on the British Pound and the Euro, triggering hard sell-offs in both of these markets.

The Sterling changed its daily trend to down on Tuesday when it took out its last swing bottom at 1.5819. Today this market tested a key 50% level at 1.5635. Although an intraday technical bounce took place, triggering a small short-covering rally, this level is not likely to hold. The major downside objective is an uptrending Gann angle from the 1.4229 bottom at 1.5429.

The slide in the Euro continued on Wednesday with this pair losing over 2%. A slowdown in the global economy is expected to hit the Euro Zone particularly hard especially since it is barely recovering from the sovereign debt crisis from sixty days ago.

Technically, the main trend on the daily chart turned down earlier in the week. Downside momentum is strong and selling pressure hard, but short-term indicators are indicating this market is getting close to oversold. The bigger charts indicate this market is likely to continue down until it reaches a major retracement level at 1.2605. Short-term, however, there may be a technical bounce at an uptrending Gann angle at 1.2836. This angle is being tested overnight. If profit-takers come into the market, then watch for a snapback rally to 1.3085 before the selling resumes.

Continue to look for the mass exodus out of higher risk currencies to continue, however investors should watch for quick short-covering rallies in most of the major currencies because of short-term oversold conditions. This first break in the British Pound and Euro may be only long liquidation. The chart patterns suggest there may be one more rally to test their recent highs. This move will give fresh shorts an opportunity to re-enter the market.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Worldwide Slowdown Drives Equities Lower

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 11 Aug 2010 16:15:00 GMT

U.S. stocks are down at the mid-session as concerns about a worldwide economic slowdown are driving down demand for higher risk assets.

A weak economic report from China ignited today’s sell-off but the embers were burning well ahead of the release of reports showing a decline in Chinese industrial output and weak retail sales. The Fed most likely triggered the pessimistic outlook for the global economy on Tuesday when it said in its policy statement that it expects prolonged weakness in the economy and loosened its monetary policy by shifting assets from mortgages to long-term debt.

With both the U.S. and Chinese economies critical to the global economy, many investors are beginning to worry about the world’s growth prospects.

Last night the U.K. also contributed to the equity market weakness after the Bank of England lowered its growth outlook. With new austerity measures ready to kick in along with higher taxes, investors are worried about the strength of the British economic recovery.

Stocks lost more ground early this morning after the U.S. said its trade deficit widened to $49.9 billion in June, more than many analysts had anticipated. This news caused some experts to revise downward second-quarter growth.

After seven days of rangebound trading, the September E-mini finally broke out of its range to the downside. This type of pattern usually indicates impending volatility which we are seeing today.

Technically this market broke through a 50%/uptrending Gann angle combination which triggered stops into the mid-1190’s. So far this index is holding a swing bottom at 1083.50, but downside momentum is building which could see this level taken out. This would change the main trend to down. Ultimately, the E-mini is set up for a minimum correction to a 50% level at 1065.25.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Weak China Data, Reaction to Fed Move Driving Equities Sharply Lower

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 11 Aug 2010 11:15:00 GMT

In what may be developing into a series of bad reports like the U.S., China reported more economic weakness overnight, triggering rallies in both the Dollar and the Japanese Yen. The moves into these so-called “safer currencies” suggests that investors are turning risk averse once again, leading to tremendous sell-offs in risky assets.

The September E-mini broke through a combination 50%/uptrending Gann angle formation triggering stops. The main trend is up but the downside momentum is building which could send this index down to the last swing bottom at 1083.50. A break through this level will turn the main trend down on the daily chart with a minimum downside objective of 1065.25.

The flight to safety buying as well as the continued reaction to the Fed move out of mortgages and into long-term debt is triggering a strong rally in the September Treasury Bonds. Despite another Treasury Note auction today and increasing supply, analysts expect demand to remain strong. Investors don’t seem to be paying too much attention to the low yields as the flight out of risky assets is making safety their main concern. Continue to look for the September T-Bonds and T-Notes to push higher with each new low in the stock market.

As mentioned several times during the last couple of weeks, gold and equity traders are competing for the same investment dollar. This means that I expect to see December Gold rally should the weakness continue in the stock market. Gold has been consolidating the past four days slightly below a major 50% price level at $1215.00. A breakout over this level is likely to trigger a further rally to the .618 price level at $1228.00.

It is important to for gold to make an attempt at taking out this level. If buyers don’t begin to step up and buy the metal, it may retreat 50% of the last rally from $1159.30 to $1213.30. This would make $1186.30 the first downside target.

September Crude Oil is back below $80.00. This market is weakening but hasn’t seen the heavy selling pressure yet. The daily chart suggests that there is plenty of room to the downside with $76.29 the next likely downside target. An expected slowdown in global demand is likely to be the catalyst behind the weakness.

The U.S. Dollar is trading sharply lower against most major currencies with the exception of the Japanese Yen. Investor sentiment has shifted away from risk leading to weakness in the commodity-linked currencies. A reduction in the outlook for U.K. GDP is leading to a huge sell-off in the British Pound.

Technically, the Euro main trend is down on the daily chart. Downside momentum is building which is expected to drive this market into an uptrending Gann angle at 1.2816. Ultimately this market is likely to retrace 50% of its recent range to 1.2605.

The main trend is also down in the British Pound. There is minor support at 1.5635. Watch for a technical bounce following a test of this level. The next major downside target is an uptrending Gann angle at 1.5429.

The flight to safety is boosting the Japanese Yen. This market is expected to continue to soar as traders take money from higher risk assets and payback borrowed Yen. Unless the Japanese government actually intervenes, look for more upside. There may be a technical reversal if there is a verbal intervention but this type of action doesn’t work for a very long time.

The Fed set the tone for today’s selling of higher risk assets. Despite efforts to ease into a period of loosening, the Fed may have actually increased the pessimism in the market. The U.S. is a leading economy so the thinking is that if the U.S. economy is cooling off, then it’s just a matter of time before this weakness spreads globally.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Fed Action Drives Treasury Bonds to New High

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 10 Aug 2010 20:45:00 GMT

Tuesday afternoon the Fed announced it was keeping its balance sheet intact while changing the composition of said balance sheet by moving out of mortgages and into long-term Treasuries. This news triggered a strong surge in the Treasury complex, sending the September Treasury Bond to a new high for the year. The move by the Fed is designed to keep the pressure on long-term rates.

Stocks rallied from earlier lows but still managed to finish lower for the session. The action by the Fed triggered an intraday short-covering rally as traders felt relief the Fed did not take more aggressive action which would have sent a pessimistic tone throughout the markets.

The September E-mini S&P 500 remained rangebound for the seventh day, thereby setting up a possible volatile move over the short-run. Clearly the chart suggests a breakout to the upside over 1129.50 while a break under 1107.00 is likely to trigger a correction back to 1065.25 over the near-term.

December Gold finished higher as the Dollar weakened. Traders may have bought when the Fed failed to mention deflation in its statement. I still feel that gold and equities are competing for the same investment dollar which means they are likely to move in opposite directions over the near-term. Today’s better close could be a sign that equities are getting ready to break.

The U.S. Dollar gave back much of its earlier gains Tuesday afternoon after the central bank’s Federal Open Market Committee revealed a disappointing outlook for the U.S. economy.

The Federal Open Market Committee left interest rates unchanged as expected as well as a majority of its policy statement from previous sessions although it kept the language stating that inflation is “subdued” without specifically mentioning any issues with deflation. It also added that interest rates would remain low for “an extended period”.

The Dollar declined from its pre-report high as the Fed kept its balance sheet intact while changing the composition of said balance sheet by moving out of mortgages and into long-term Treasuries.

The FOMC vote was not unanimous, as Kansas City Federal Bank President Thomas Hoenig once again remained the lone hawk. The vote was not “bookended” by any doves as some had anticipated.

Before the release of the report that was much speculation as to how the Fed would address the issue of deflation. Concerns were being raised because if allowed to spiral out of control, deflation would be very difficult to contain, unlike inflation which the Fed usually battles with many of its monetary policy weapons.

The move by the Fed was enough to keep the pressure on interest rates while implying that the outlook for the economy remains rocky. Some analysts felt the move by the Fed was merely symbolic, but did send a strong signal that it was not going to stand on the sidelines doing nothing. Moving principal payments from the mortgage market to long-term Treasuries leaves the door open for the central bank to make more aggressive balance sheet moves at its next meeting on November 3 should the economy fail to improve.

While not actually disappointing investors with its actions, the Dollar did decline after an early morning surge triggered by speculation the Fed would act move aggressively to loosen monetary policy because of a slowing economy. Instead, the Fed may have acted more prudently with its action rather than create an aura of pessimism with unnecessary aggressive action.

Traders shouldn’t get too comfortable with the short-side of the Dollar despite the initial reaction because trading conditions suggest the Greenback is ripe for a rally due to increasing interest in safe haven assets. The next few days will give more clues as to whether the Dollar will rally or resume its recent decline. The first sign of weakness will be new highs in markets that have corrected the past two days, namely the Euro and the British Pound. The Euro and the Sterling both bounced back following earlier weakness, but not enough to reverse the developing downtrend.

Overnight a softer U.K. housing report overshadowed this afternoon’s U.S. Federal Open Market Committee announcement as falling house prices increased jitters in an already fragile economy.

Early in the trading session, a report from the Royal Institution of Chartered Surveyors said July house prices turned negative for the first time since July 2009. This report echoes earlier reports that showed a rising supply of houses for sale and decreased buyer interest. The return of a buyers market indicates the strong possibility of a softer housing market through at least the end of the year, leading to speculation of a double-dip recession.

Technically, after failing to follow-through to the upside following the penetration of a major Fibonacci retracement level at 1.5967 in two out of the last three trading session, the British Pound took out a main swing bottom at 1.5819. This move turned the main trend down on the daily chart. The chart pattern suggests that 1.5633 is the next likely downside target, followed by an uptrending Gann angle at 1.5400.

Concern about a slow down in the global recovery also pressured the Euro. Before the New York session opening, the Euro was trading on its low, threatening to turn the main trend to down on the daily chart on a move through the last swing bottom at 1.3119, a move which took place shortly after the NY opening.

Based on the range of 1.1876 to 1.3334, the chart indicates that this current break could turn into something substantial if investors decide to begin shedding risky assets. If this current break turns into a hard correction, the daily chart indicates that 1.2605 would be the minimum downside target. This price represents a 50% correction of the June to August rally.

Besides the start of downtrends in the Euro and British Pound, the shedding of risky assets such as gold and crude oil could be another sign that the Dollar is getting set to rally. Falling commodity and equity markets are likely to pressure the commodity-linked currencies.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Fed Helps Equities Recover Earlier Losses

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 10 Aug 2010 18:45:00 GMT

The news that the Fed is going to let the economy work its way through the slow down helped equity markets regain some of its earlier losses.

The Fed’s decision to shift buying interest out of mortgages and into Treasury Bonds is helping September T-Bonds and T-notes to rally to new near term highs.

Both crude oil and gold also rallied on the move by the Fed as short-covering rallies, driven by demand for higher risk assets, flourished.

The Federal Open Market Committee left interest rates unchanged as expected as well as a majority of its policy statement from previous sessions.

The Dollar fell and stocks rose as the Fed kept its balance sheet intact while changing the composition of said balance sheet by moving out of mortgages and into long-term Treasuries.

The Fed also said that inflation is “subdued” without specifically mentioning any issues with deflation. It also added that interest rates would remain low for “an extended” period.

The FOMC vote was not unanimous, as Kansas City Federal Bank President Thomas Hoenig once again remained the lone hawk. The vote was not “bookended” by any doves as some had anticipated.

The news weakened the Dollar by fueling short-covering rallies in most major Forex markets.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Investors Selling Risk ahead of FOMC Decision

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 10 Aug 2010 16:15:00 GMT

Investors have been selling risk this morning ahead of the Fed’s Federal Open Market Committee monetary policy decision. The selling actually began overnight and continued into the day session as investors slashed risky positions.

The September E-mini S&P 500 appears to be in a position to fall further on a break through 1107.00. This action will take out both a 50% level and an uptrending Gann angle on the daily chart.

September Treasury Bond traders seem to be betting on the Fed to reinstate its quantitative easing program. This asset-buyback program will flood the market with cash and is expected to drive yields lower and prices to a new high.

Talk of a developing deflationary scenario is helping to pressure both gold and crude oil.

Profit-taking and position squaring ahead of this afternoon’s Federal Open Market Committee decision is helping to drive the U.S. Dollar to its highest level this month. There is still uncertainty regarding how the Fed will act later today. Some investors are looking for a clear decision to renew quantitative easing. Others believe that the Fed will only change the language in its statement acknowledging the economy is slowing down.

The Fed is walking a thin line with today’s decision. It has to be careful not to spook the markets by acting too hastily. Furthermore, it must act with clarity and conviction in order to instill confidence in the markets that it is on the right path.

The Euro changed its main trend to down this morning on the daily chart when it crossed the last swing bottom at 1.3119. If pessimism prevails after the Fed decision and investors continue to shed risky assets, then look for the start of a serious correction to a major 50% price level at 1.2605.

The British Pound also changed its daily trend to down when it broke a swing bottom at 1.5819. After finding resistance at a .618 price level at 1.5967, it is possible it may try to establish short-term support at the 50% level at 1.5635. If this area fails, then look for a move to 1.5400. Traders turned negative on the Sterling following a drop in home prices. With this leading indicator turning bearish, traders fear that the start of planned spending cuts and the implementation of new taxes may have a negative effect on the economy.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Fed Faces Pivotal Decision; Investors Shedding Risky Assets

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 10 Aug 2010 11:15:00 GMT

The Federal Reserve will meet today faced with an important decision that some say is the most pivotal of the year. The Federal Open Market Committee is going to have to decide whether to abandon its belief that the economy is on a path to a slow, uncertain recovery or begin to consider new ways to keep the recovery from losing steam.

The recent series of weak economic reports including last Friday’s disappointing jobs data has caused the Fed policymakers to abandon their crusade against inflation, and shift their focus on the strong possibility of deflation.

At this time the Fed is walking a thin line. It has to be cautious about what signal it sends to investors today. With today’s decision, it does not want to fuel pessimism. On the other hand, a deflationary spiral has the potential of being devastating to the economy.

The Fed cannot afford to be late in responding to the threat of deflation because unlike inflation, it is too hard of a problem to fix. In the past, the Fed has demonstrated that it has the tools to fight inflation, but a deflationary scenario is another story.

Traders should be prepared for just about anything from the Fed today. It may decide to pass on any concrete plans to stimulate the economy or it may renew its quantitative easing program. Experts expect, at a minimum, the Fed will acknowledge the slowdown in the recovery and discuss steps to revive the economy through asset buyback programs similar to what they just let expire in March.

Another issue facing the Fed today is just how seriously its members are taking the threat of deflation. Most experts agree that Fed Chairman Bernanke has enough votes to alter previous policy statements since based on previous meetings; there is only one true hawk on the FOMC. However, there are only two members who have previously voiced their opinions on the threat of deflation.

Based on this assessment, the Fed is likely to revert to using a tool that it is familiar with – quantitative easing – rather then introducing fresh, untested weapons. This means that if it decides on anything at this meeting it will be another round of purchasing financial assets to hold down long-term interest rates and increase the supply of money.

Most analysts agree the Fed is likely to renew its QE policy, but have left open the possibility it will discuss lowering the interest it pays on reserves that banks keep at the Fed in excess of what they are required to, and altering the “extended period” language it has been using to describe how long short-term interest rates will remain at “exceptionally low” levels.

As mentioned earlier, however, the key will be how the Fed presents its plan to the investment world. The Fed has to act with clarity and conviction and not trigger thoughts of an overreaction. If investors interpret the FOMC decision the wrong way, a wave of pessimism could hit the marketplace, driving equity markets sharply lower and the Dollar and Treasury instruments higher.

This morning, investors seem to be leaning to the pessimistic side of the equation. Risky assets are taking a hit including currencies, equities, gold and crude oil, as traders shed positions ahead of this afternoon’s FOMC decision.

A flight to safety rally is taking place in the Forex markets but this isn’t the only reason for the strength in the Dollar.

A softer U.K. housing report is overshadowing this afternoon’s U.S. Federal Open Market Committee announcement as falling house prices increased jitters in an already fragile economy.

Early in the trading session, a report from the Royal Institution of Chartered Surveyors said July house prices turned negative for the first time since July 2009. This report resonates other reports that showed a rising supply of houses for sale and decreased buyer interest. The return of a buyers market indicates the strong possibility of a softer housing market through at least the end of the year, leading to speculation of a double-dip recession.

Technically, after failing to follow-through to the upside following the penetration of a major Fibonacci retracement level at 1.5967 in two out of the last three trading session, the British Pound took out a main swing bottom at 1.5819. This move turned the main trend down on the daily chart. The chart pattern suggests that 1.5633 is the next likely downside target, followed by an uptrending Gann angle at 1.5400.

Concern about a slow down in the global recovery is also pressuring the Euro. Before the New York session opening, the Euro is trading on its low, threatening to turn the main trend to down on the daily chart on a move through the last swing bottom at 1.3119.

Based on the range of 1.1876 to 1.3334, the chart indicates that this current break could turn into something substantial if investors decide to begin shedding risky assets. If this current break turns into a hard correction, the daily chart indicates that 1.2605 would be the minimum downside target. This price represents a 50% correction of the June to August rally.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Investors Looking for Fed Action

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 09 Aug 2010 20:45:00 GMT

U.S. equity markets rose on Monday in light trading. The upside bias may have been triggered by investors expressing optimism that the Fed will take positive steps toward jumpstarting the economy after several weeks of sluggishness.

The lack of fresh economic news and Tuesday’s Federal Open Market Committee meeting kept investors on the sidelines today, causing sideways trading for much of the day.

The bias was to the upside in the stock indices but there was very little commitment in terms of size. Individual stocks drove the indices higher rather than economic news.

December Gold finished lower after failing near a major 50% level at $1215.00. If equity markets surge to the upside, then look for gold to resume the downtrend. Gold and equities are competing for the same investment dollar at this time.

On Monday the Dollar rose close to 1% against the Swiss Franc. The current chart formation suggests the construction of a possible support base. The low end of the support appears to be 1.0400 to 1.0393. The main trend will change up on the daily chart on a trade through the last swing top at 1.0640.

The U.S. Dollar traded higher ahead of tomorrow’s FOMC meeting. In what was probably position squaring ahead of the Fed meeting; the Dollar posted gains against all majors. The biggest gain coming versus the Swiss Franc. The lack of fresh economic news following Friday’s disappointing Non-Farm Payrolls Report was most likely a contributing factor to the Dollar’s strength.

On Tuesday the Federal Open Market Committee is expected to consider renewing its quantitative easing program by reintroducing its purchase of government bonds and mortgages. Some believe, however, that the Fed is only going to consider extending its monetary policy rather than making an actual change. Either way, investors will be keying in on the language used by the Fed in its policy statement.

Look for the Dollar to gain over the short-run if the Fed’s remains firm in its policy statement. Any softening in the Fed’s tone will put pressure on the Greenback.

The U.S. Dollar / Canadian Dollar traded flat as traders are still trying to sort out last Friday’s surprise rise in Canadian unemployment. With the U.S. and Canadian economies linked closely, tomorrow’s Fed meeting is expected to heavily influence the direction of the Loonie. Any attempt at a short-term fix by the Fed is likely to be bullish for the Greenback. If the Fed decides to take a ‘wait and see” attitude then look for the U.S. Dollar to weaken.

The latest talk in Canada which may help hold the currency in a range is that the economy is cooling which could mean the Bank of Canada will refrain from an interest rate hike at its next meeting on September 8.

The Euro broke on profit-taking on Monday. Technically, the Euro traded in an inside range with a lower close. A downtrending angle from the November top at 1.5144 is helping to stop the advance. The uptrend is still intact, but a break through 1.3119 will turn the main trend down.

For the fourth time in a week the British Pound failed to gain upside momentum when it crossed over a Fibonacci retracement level at 1.5967. The main trend is still up, but a break through 1.5819 will turn the main trend down. The failure to breakout over the Fib level could be an indication that the rally is running out of steam, but because of the low volume, the weakness may have been profit-taking. A close over this level is likely to trigger an acceleration to the upside.

Continue to look for the Forex markets to trade in tight and narrow ranges until the Fed’s announcement Tuesday afternoon. It looks as if Bernanke has enough votes to implement a dovish strategy but depending on how the committee assesses the recent economic data, the FOMC may hint at future changes in monetary policy while evaluating fresh data on a month to month basis.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Slow News Day Leaves Stocks Rangebound but Higher

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 09 Aug 2010 16:15:00 GMT

The lack of fresh economic news and tomorrow’s Federal Open Market Committee meeting have kept investors on the sidelines today, causing sideways trading.

The bias has been to the upside in the stock indices but there has been very little commitment in terms of size. Individual stocks are driving the indices higher rather than economic news.

The U.S. Dollar is trading higher at the mid-session ahead of tomorrow’s FOMC meeting. In what is probably position squaring ahead of the Fed meeting; the Dollar is posting gains against all majors. The biggest gain coming against the Swiss Franc. The lack of fresh economic news following Friday’s disappointing Non-Farm Payrolls Report is most likely a contributing factor to the Dollar’s strength.

On Tuesday the Federal Open Market Committee is expected to consider renewing its quantitative easing program by reintroducing its purchase of government bonds and mortgages. Some believe, however, that the Fed is only going to consider extending its monetary policy rather than making an actual change. Either way, investors will be keying in on the language used by the Fed in its policy statement.

Look for the Dollar to gain over the short-run if the Fed’s remains firm in its policy statement. Any softening in the Fed’s tone will put pressure on the Greenback.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks and Gold Likely to Battle for Control of Investment Dollars

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 09 Aug 2010 11:15:00 GMT

Stocks are trading higher overnight and the Dollar is trading mixed. Without any major U.S. economic reports this morning and the Fed meeting on Tuesday, trading could be light and directionless today. On the other hand, sometimes thin trading conditions trigger wild swings so investors should be on their toes so as to not get caught on the wrong side of the market.

With Friday’s Non-Farm Payrolls report behind them, traders will have to wait until Tuesday afternoon before getting any fresh market driving economic news. Although Friday’s employment data was disappointing, investors still are not sure if it was weak enough to warrant an immediate change in the Fed’s monetary policy. Pessimistic traders believe the Fed has enough evidence of an economic slowdown to renew its quantitative easing program. Optimistic traders think the Fed will alter the language a little in its policy statement, but hold off for another month before reintroducing stimulus.

Two markets to key on before the Fed decision will be December Gold and the September E-mini S&P. Gold as surged recently following a long sell-off on speculation that equities may break. Both markets compete for the same investment Dollar. Stocks have maintained an upward bias but have been rangebound because of indecision about the status of the economy.

This morning it looks as if equities are once again looking bullish while gold is trading flat. With gold nearing a retracement level and equities poised to break out to the upside, watch for a rally in stocks to trigger a profit-taking break in gold. According to the charts, only a break through last week’s lows in the equity markets can help gold maintain its upward bias. One of these markets has to give in to investor demands. In summary, higher stocks should lead to a weaker gold market.

December Gold surged to the upside on Friday, finishing the week in a strong position as traders bought the metal as a hedge against a potential drop in the equity markets and because of the weakness in the Dollar.

The close put the market in a position to test a major 50% price level at $1215.00. This price represents a retracement of the $1270.60 to $1159.30, June to July sell-off. After briefly piercing a downtrending Gann angle at $1212.60 today, the market settled back indicating there may be sellers up here. This is also a sign that more sellers may show up once the market completes the 50% retracement. Long traders should watch for a technical bounce at this level. The chart pattern suggests there may be a pull-back to $1186.30 sometime next week.

The strong surge in the September T-Notes and T-Bonds is an indication that investors are betting on new language in the Fed’s policy statement following this week’s August 10 meeting.

Investors expect the Fed to change the language it has been using to describe the length of the current economic slow down. In addition, investors are looking for the Fed to announce the renewal of its asset buyback program.

I’ve said this a countless number of times, but I’ll say it again, the bonds are the best indicator for the economy. As long as the Treasuries continue to maintain their higher-top, higher-bottom formation, look for the economy to remain weak.

Stocks were under pressure since the release of the jobs data early Friday morning. The markets sold off as the news was what not what investors expected, however, the ability to hold the markets in a range most of the day indicates that it was only disappointing and not earth-shattering.

Despite trading lower on Friday, the markets managed to hold on to their gains for the week. The rally, however, does appear to be running out of steam. Only a follow-through to the downside will confirm this analysis. If Friday’s low holds, then stocks could begin a breakout to the upside.

The British Pound is hugging a key Fibonacci retracement level against the Dollar amid speculation the Fed will announce a renewal of stimulus measures to boost the economy at its FOMC meeting on Tuesday.

The Sterling is continuing its rally from Friday after forming a new main bottom at 1.5819. Trading has been light with the range tight as the market toys with a major retracement level at 1.5967. Early last week the Pound made a top at this level, leading to the break to 1.5819. The key to sustaining this rally will be a close above 1.5967. Intraday traders should watch to see if support can be established at this price level if it can be regained. The uptrend will remain intact as long as the new main bottom at 1.5819 holds as support.

Concerns about the U.S. economy weakening are helping to make the British Pound an attractive investment at this time. While the U.S. has been struggling to maintain growth, the U.K. economy has remained relatively firm.

Investors have been optimistic about the U.K. currency since the new coalition government took control in May. Although they immediately proposed spending cuts and tax hikes, investors have embraced their decisions as necessary for the economy. The fear at the time was that a growing spending deficit would lead to a downgrade of U.K. debt.

Although the U.K. economy remains on path toward sustaining its recovery, some investors still feel that some stimulus may be necessary to maintain growth. They cite the tax hikes and austerity measures as the main reasons why the economy may stall during the third and fourth quarters.

A Fed decision on Tuesday to reintroduce stimulus measures should be enough to propel the British Pound higher. Should the Fed back away from a reintroduction of stimulus measures then look for the Sterling to weaken as speculators reassess their positions. The Fed is either going to act now because they see the situation worsening or wait another month because its interpretation of the economic data does not warrant immediate action.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

December Gold Poised to Test Major Obstacle at $1215.00

jhyerczyk@yahoo.com (James A. Hyerczyk) — Fri, 06 Aug 2010 20:45:00 GMT

December Gold surged to the upside on Friday, finishing the week in a strong position as traders bought the metal as a hedge against a potential drop in the equity markets and because of the weakness in the Dollar.

The close put the market in a position to test a major 50% price level at $1215.00. This price represents a retracement of the $1270.60 to $1159.30, June to July sell-off. After briefly piercing a downtrending Gann angle at $1212.60 today, the market settled back indicating there may be sellers up here. This is also a sign that more sellers may show up once the market completes the 50% retracement. Long traders should watch for a technical bounce at this level. The chart pattern suggests there may be a pull-back to $1186.30 sometime next week.

The strong surge in the September T-Notes and T-Bonds is an indication that investors are betting on new language in the Fed’s policy statement following next week’s August 10 meeting.

Investors expect the Fed to change the language it has been using to describe the length of the current economic slow down. In addition, investors are looking for the Fed to announce the renewal of its asset buyback program.

I’ve said this a countless number of times, but I’ll say it again, the bonds are the best indicator for the economy. As long as the Treasuries continue to maintain their higher-top, higher-bottom formation, look for the economy to remain weak.

Stocks were under pressure since the release of the jobs data early this morning. The markets sold off as the news was what not what investors expected, however, the ability to hold the markets in a range most of the day indicates that it was only disappointing and not earth-shattering.

Despite trading lower on Friday, the markets managed to hold on to their gains for the week. The rally, however, does appear to be running out of steam.

The September Euro made a new high for the week on Friday, driven by disappointing U.S. jobs data. The rally through the former top at 1.3262 resumed the uptrend while forming a new swing bottom at 1.3119 in the process.

This morning the U.S. government released disappointing jobs data which solidified the thought that the economic recovery was stalling. The report which said private employers added fewer jobs during July than forecast, raised concerns amongst investors about the sustainability of the U.S. recovery.

The disappointing non-farm payrolls data will most likely be used by Fed officials next week when they set monetary policy. The weaker jobs number will most likely mean the Fed will announce stimulus measures to help revive the economy which may include renewing its quantitative easing program.

Improvements in the Euro Zone economy at a time when the U.S. economy is still struggling makes the Euro a more attractive investment. Upside momentum indicates the Euro has enough buying power behind it to reach the 50% level at 1.3510 over the near-term.

Earlier this week the European Central Bank monetary policy committee voted to leave its benchmark interest rate unchanged the historically low 1% level. This move was unanimously expected by traders.

Following the release of the interest rate decision, ECB President Trichet noted that the European bank stress tests completed since the last meeting have helped increase transparency and fueled a move toward restoring market confidence in the banking sector.

In the wake of recent strong Euro Zone economic data, analysts had expected Trichet to outline an exit strategy or discuss the ECB’s plan for its special liquidity provisions. In other words, is the ECB going to continue to provide free-flowing liquidity to the market or begin to withdraw it. Trichet indicated the ECB would consider this action on that next month.

Trichet failed to say anything really bullish about the Euro, but actually may have helped limit gains by stating that the second half of 2010 was likely to be “much less buoyant” than the second quarter because of the implementation of new financial austerity measures. He also added that it was too early to “declare victory” in the economic crisis.

Based on Trichet’s comments, the Euro is most likely to continue to be driven by economic news regarding the U.S. economy. At this time, the ECB seems a little more upbeat about the Euro Zone economy while the U.S. Fed is being encouraged to consider the renewal of its quantitative easing program to ward off a potential double-dip recession. As long as the U.S. economy remains weak and interest rates low, look for the Euro to remain firm.

The situation is not all rosy for the Euro however. Many of the recent improvements in the Euro Zone economy have taken place before financial austerity measures were in full effect. Furthermore the ECB is still providing stimulus. Like the U.S., consumer spending will be the key to sustaining the recovery. If consumers decide to pull in their purse strings at a time when the government is cutting spending, then the economies in the Euro Zone may come to a screeching halt.

Aside from the disappointing U.S. jobs data report, the biggest surprise was the loss of jobs in Canada. Throughout the entire global recession, the talk of the town has been Canada and how the country avoided a prolonged recession and banking crisis.

The September Canadian Dollar traded sharply lower due to an unexpected decline in the Canadian jobs market. The news out of Canada reflects its first job losses of the year.

Friday’s Canadian jobs report showed that the economy lost 9,300 jobs in July while the unemployment rate unexpectedly rose to 8 percent from 7.9 percent. Analysts had predicted an increase of 15,000 jobs after a strong gain of 93,200 in June.

The Canadian Dollar fell on the bad jobs data as traders speculated the weakening U.S. economy would have an adverse affect on the Canadian economy going forward.

Based on the drop in yields and the rise in Canadian bond prices, investors are beginning to price in the possibility that the country’s recovery from the recession is starting to cool and could encourage the Bank of Canada to refrain from additional interest rate hikes over the near-term.

Traders should continue to focus on the weak U.S. economy as the main catalyst behind the movement in the currency markets. With interest rates expected to continue to remain low for a prolonged period of time and the Fed expected to remain dovish on the economy, continue to look for a weaker U.S. Dollar.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Treasury Investors Betting on Change in Fed Policy

jhyerczyk@yahoo.com (James A. Hyerczyk) — Fri, 06 Aug 2010 16:15:00 GMT

The strong surge in the September T-Notes and T-Bonds is a strong indication that investors are betting on new language in the Fed’s policy statement following next week’s August 10 meeting.

Investors expect the Fed to change the language it has been using to describe the length of the current economic slow down. In addition, investors are looking for the Fed to announce the renewal of its asset buyback program.

Stocks have been under pressure since the release of the jobs data. The markets sold off as the news what not what investors expected, however, the ability to hold the markets in a range most of the day indicates that it was only disappointing and not earth-shattering.

Despite trading lower on Friday, the markets are managing to hold on to their gains for the week. A last hour sell-off, however, may put the major indices in a position to form a bearish weekly reversal. This week’s last hour of trading carries more weight than usual in determining the direction of next week’s trading action.

The Euro made a new high for the week, driven by disappointing U.S. jobs data. The rally through the former top at 1.3262 resumed the uptrend while forming a new swing bottom at 1.3119 in the process.

This morning the U.S. government released disappointing jobs data which solidified the thought that the economic recovery was stalling. The report which said private employers added fewer jobs during July than forecast, raised concerns amongst investors about the sustainability of the U.S. recovery.

The disappointing non-farm payrolls data will most likely be used by Fed officials next week when they set monetary policy. The weaker jobs number will most likely mean the Fed will announce stimulus measures to help revive the economy which may include renewing its quantitative easing program.

Improvements in the Euro Zone economy at a time when the U.S. economy is still struggling makes the Euro a more attractive investment. Upside momentum indicates the Euro has enough buying power behind it to reach the 50% level at 1.3510 over the near-term.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Equities Called Lower after U.S. Jobs Data Disappoints

jhyerczyk@yahoo.com (James A. Hyerczyk) — Fri, 06 Aug 2010 11:15:00 GMT

Stocks are called lower on the opening based on pre-opening weakness. After an uneventful night, equities markets sold off sharply following a worse than expected U.S. Non-Farm Payrolls Report. The bad news adds to the developing pessimism about the economy and may put pressure on the Federal Reserve to take make more aggressive monetary moves to boost the economy.

This morning’s Non-Farm Payrolls Report showed a drop of 131,000 jobs in July. This included an increase of 71,000 private payrolls jobs. Pre-port guesses were for a loss of between 65,000 and 90,000 jobs, private payrolls were expected to increase by 100,000.

The country’s unemployment rate held steady at 9.5% after a call for a rise to 9.6%.

Following the report, the Dollar plunged against most majors, Treasury markets rose while equity markets fell. Gold is soaring and crude oil is trading lower.

The jobs report is disappointing but the news is not earth-shattering. Stock market losses are building ahead of the opening. This could translate into sharply lower markets by the end of the day. On the other hand, the private sector did add jobs. Some traders may treat this news as a silver-lining, thereby slowing down the rate of decline.

September Treasury Bonds and Treasury Notes are selling off on the jobs news. The weaker than expected jobs number is likely to put pressure on the Fed to renew its quantitative easing program following its next meeting on August 10. In addition, the market is pricing in lower interest rates well into 2011.

The Dollar is mostly losing ground to the Euro and the British Pound. While both the Euro Zone and U.K. seem to be on path to shore up their economies, the U.S. is still floundering with a weakening economy and a fresh round of stimuli. The EZ’s Trichet sounded optimistic yesterday, following the European Central Bank policy statement while the Fed’s Bernanke continues to promote a gloomy outlook.

The weak outlook for the economy is pressuring crude oil. Traders feel that demand is likely to fall for energy if jobs continue to be lost.

December Gold is trading sharply higher. Money is likely leaving the paper asset markets and moving into the hard asset gold market. The weaker Dollar is contributing to the strength in the gold market.

Although the jobs data was not that bearish, investors are definitely feeling disappointed. Expectations are for the equity markets to feel downside pressure based on the way money is being allocated between fixed income, gold and foreign currency markets.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks Finish Lower in Light Trade on Job Data Jitters

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 05 Aug 2010 20:45:00 GMT

Nervous traders kept the U.S. equity markets under pressure on Thursday following an unexpected rise in weekly jobless claims. This news made traders more cautious about tomorrow’s Non-Farm Payrolls Report. A worse than expected employment number could send the stock markets sharply lower since it would clearly send a signal that the U.S. economic recovery is stalling.

Treasury traders looked to the long-side on Thursday following the bad claims number. T-Bond and T-Note traders could be speculating on a weaker jobs number tomorrow. Some traders are taking outright long positions in anticipation of the Fed renewing its asset-buyback program that was beginning to get phased out. Whatever the report tells us tomorrow will set the tone for the FOMC policy meeting next week.

An unexpected rise in U.S. weekly jobless claims sent the Dollar/Yen sharply lower, putting it in a position to test the November 2009 low at 84.83. News that the number of Americans seeking unemployment benefits rose fueled speculation that the U.S. economic recovery is stalling.

The weaker jobs data gave investors the jitters, encouraging them to sell higher yielding equities. This sent traders into the safety of the lower yielding Japanese Yen.

The Japanese Yen is set to rise even further especially if tomorrow’s U.S. Jobs Report is worse than expected. Furthermore, the Fed is likely to put pressure on the Dollar next week following its FOMC meeting when it is expected to announce the renewal of its quantitative easing program.

Gains in the Yen could be limited by talk that the Bank of Japan is set to intervene. Although the Japanese government is issuing verbal interventions at this time, further appreciation in the Yen may hurt exports and the economy, forcing it to act more decisively than in the past.

The U.S. Dollar traded trading mostly lower versus the major currencies today in light trading as traders curtail activity ahead of Friday’s U.S. Non-Farm Payrolls Report. The employment report is expected to show a decline of 65,000 to 90,000 jobs, pushing up the unemployment rate to 9.6%. The public-sector part of the report is expected to show a loss of at least 165,000 jobs due to government firings of census workers. The private-sector is forecast to have added at least 100,000 jobs.

The focus will most likely be on the private-sector number. It this number comes out better-than-expected, look for the Dollar to rise.

The Dollar has been under pressure most of the trading day due to a surprise drop in weekly initial claims. Unemployment benefits rose by 19,000 to 479,000 in the latest week. Pre-report estimates called for a drop to 453,000.

The European Central Bank and Bank of England monetary policy committees voted to leave there respective benchmark interest rates unchanged at historically low levels. The ECB left its key borrowing rate at 1%. The BoE agreed to maintain its 0.50% level. Both moves by the central banks were expected.

Following the release of the interest rate decision, ECB President Trichet noted that the European bank stress tests completed since the last meeting have helped increase transparency and fueled a move toward restoring market confidence in the banking sector.

In the wake of recent strong Euro Zone economic data, analysts had expected Trichet to outline an exit strategy or discuss the ECB’s plan for its special liquidity provisions. In other words, is the ECB going to continue to provide free-flowing liquidity to the market or begin to withdraw it. Trichet indicated the ECB would consider this action on that next month.

Trichet failed to say anything really bullish about the Euro, but actually may have helped limit gains by stating that the second half of 2010 was likely to be “much less buoyant” than the second quarter because of the implementation of new financial austerity measures. He also added that it was too early to “declare victory” in the economic crisis.

Based on today’s comments, the Euro is most likely to continue to be driven by economic news regarding the U.S. economy. At this time, the ECB seems a little more upbeat about the Euro Zone economy while the U.S. Fed is being encouraged to consider the renewal of its quantitative easing program to ward off a potential double-dip recession. As long as the U.S. economy remains weak and interest rates low, look for the Euro to remain firm.

The Bank of England as expected left interest rates unchanged. Traders will not be watching economic reports to see if the implementation of new austerity measures and tax hikes has an adverse affect on the economy after strong second-quarter GDP data was posted. The central bank will also continue to monitor the inflation rate which is currently above the target level.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

U.S. Equity Markets Trading Mostly Lower ahead of Friday’s Jobs Data

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 05 Aug 2010 16:15:00 GMT

U.S. equity market traders failed to see any reason to aggressively buy stocks ahead of Friday’s Non-Farm Payrolls Report, putting the indices under pressure most of the trading session.

Traders began to pressure the futures markets shortly before the U.S. opening in a delayed reaction to this morning’s surprise increase in the number of jobless claims. With prices high and technical indicators overbought, investors found little reason to chase the markets higher. The action can best be described as “churning” as day traders dominate the markets today.

The surprise weakness in the weekly claims report helped trigger a rally in the September T-Bonds and T-Notes. Some aggressive traders seem to be betting on the long-side ahead of tomorrow’s important Non-Farm Payrolls Report. The trend remains up in both of these markets and is expected to remain so for a prolonged-period of time especially if a weaker than expected jobs report forces the Fed to renew its quantitative easing problem when the FOMC meets on August 10.

The U.S. Dollar is trading mostly lower versus the major currencies today in light trading as traders curtail activity ahead of Friday’s U.S. Non-Farm Payrolls Report. The employment report is expected to show a decline of 65,000 to 90,000 jobs, pushing up the unemployment rate to 9.6%. The public-sector part of the report is expected to show a loss of at least 165,000 jobs due to government firings of census workers. The private-sector is forecast to have added at least 100,000 jobs.

The focus will most likely be on the private-sector number. It this number comes out better-than-expected, look for the Dollar to rise.

The Dollar has been under pressure most of the trading day due to a surprise drop in weekly initial claims. Unemployment benefits rose by 19,000 to 479,000 in the latest week. Pre-report estimates called for a drop to 453,000.

The European Central Bank and Bank of England monetary policy committees voted to leave there respective benchmark interest rates unchanged at historically low levels. The ECB left its key borrowing rate at 1%. The BoE agreed to maintain its 0.50% level. Both moves by the central banks were expected.

Following the release of the interest rate decision, ECB President Trichet noted that the European bank stress tests completed since the last meeting have helped increase transparency and fueled a move toward restoring market confidence in the banking sector.

In the wake of recent strong Euro Zone economic data, analysts had expected Trichet to outline an exit strategy or discuss the ECB’s plan for its special liquidity provisions. In other words, is the ECB going to continue to provide free-flowing liquidity to the market or begin to withdraw it. Trichet indicated the ECB would consider this action on that next month.

Trichet failed to say anything really bullish about the Euro, but actually may have helped limit gains by stating that the second half of 2010 was likely to be “much less buoyant” than the second quarter because of the implementation of new financial austerity measures. He also added that it was too early to “declare victory” in the economic crisis.

Based on today’s comments, the Euro is most likely to continue to be driven by economic news regarding the U.S. economy. At this time, the ECB seems a little more upbeat about the Euro Zone economy while the U.S. Fed is being encouraged to consider the renewal of its quantitative easing program to ward off a potential double-dip recession. As long as the U.S. economy remains weak and interest rates low, look for the Euro to remain firm.

The Bank of England as expected left interest rates unchanged. Traders will not be watching economic reports to see if the implementation of new austerity measures and tax hikes has an adverse affect on the economy after strong second-quarter GDP data was posted. The central bank will also continue to monitor the inflation rate which is currently above the target level.

Look for sideways trading the rest of the afternoon and overnight as volume is expected to thin ahead of tomorrow’s important U.S. jobs report.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks Steady after ECB, BoE Rate Decisions; Focus Remains on Jobs Data

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 05 Aug 2010 11:15:00 GMT

U.S. equity markets are trading flat in limited trading despite rallies in the Euro and British Pound. Earlier in the week, strength in both of these markets triggered rallies in stocks as traders demanded risky assets.

Earlier this morning, the European Central Bank and Bank of England policymakers voted to leave interest rates unchanged. Stocks failed to move on the news as it was already priced into the market. The press conference by ECB President Trichet could move the markets, if he announces an exit strategy now that it appears the Euro Zone economy is on the road to recovery.

Stocks firmed late Wednesday after trading in a tight range throughout the day following a good ADP employment report. Today another piece of the employment puzzle will be revealed in the form of weekly initial claims. Both of these reports are leading up to Friday’s Non-Farm Payrolls Report. Early guesses are for this report to show a decline of 65,000 to 90,000 jobs. The Fed will also be watching this report closely as it will be a strong determinant in next week’s monetary policy decision.

After an early reaction to the initial claims report, volume may dry up today ahead of tomorrow’s big report, leading to a choppy, sideways trade.

Treasury futures are at a key juncture on the charts. Yesterday the September T-Notes made a new high for the year as yields plunged. The lower close, however, helped form a closing price reversal top which could lead to the start of a 2 to 3 day break.

September Treasury Bonds also had a reversal down, but the pattern suggests the possible formation of a bearish secondary lower top formation.

Although the Fed is expected to keep interest rates low and may implement another round of quantitative easing, sentiment has shifted toward risky assets, putting pressure on the lower yielding Treasuries.

December Gold is trading flat this morning, following a strong five day rally. The main trend is still down despite the rally with the market stopping short of taking out the recent main top at $1207.50. A move through this price will turn the main trend to up. If weakness develops today, then look for the start of a correction back to $1182.40 over the near-term. At this price level, traders will have to decide whether to form a secondary higher bottom or resume the downtrend.

On Thursday the Bank of England policymakers voted to leave its benchmark interest rate at the historically low 0.5%. This move was expected because BoE officials are still unsure what the effect the newly implemented austerity measures will have on the economy. Furthermore, there is still uncertainty over what the upcoming new taxes will have on economic growth. Some investors feel the central bank will have to remain flexible with its monetary policy in case the developing economic recovery stalls.

Lately the British Pound has been trending higher, reaching a major retracement zone. Most of this move has been driven by speculators looking for improvements in the U.K. economy while the U.S. economy falters. The recent Second Quarter GDP Report was better than expected; leading some investors to believe the economy is on the road to recovery. Skeptics cite the fact that this reading took place before the austerity measures were implemented.

High inflation has also had investors worried. One of the challenges for the Bank of England will be controlling inflation without stifling growth. Uncertainty over how the BoE intends to do this may limit gains and could begin to put pressure on the Sterling.

Technically, the British Pound found resistance at a key .618 retracement level earlier this week at 1.5967. Holding this level could trigger the start of a break back to 1.5635. Overnight the Sterling traded below 1.5884, putting this currency lower for the week. The market bottomed early in the trading session and put in a short-term top shortly after the central bank announcement.

Although the Pound is trading higher shortly before the New York opening, gains could be limited as traders stand aside ahead of tomorrow’s U.S. Non-Farm Payrolls Report. This report will offer more insight into the state of the economy and influence the Fed’s monetary policy decision at next week’s FOMC meeting. There is speculation that the Fed will renew its quantitative easing program. This along with low interest rates could keep downside pressure on the Dollar.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Upbeat Economic Data Boosts U.S. Equity Markets

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 04 Aug 2010 20:45:00 GMT

Signs of an improving labor market and better than expected services-sector growth helped to support U.S. equity markets on Wednesday.

U.S. equity markets traded slightly higher following the release of an upbeat ADP Employment Report and a positive ISM manufacturing number. Investors were churning the indices at the mid-session before pushing them higher into the close. Most of the day, it seemed that traders were sorting out whether these reports represented an aberration or a change in trend. Traders were also most likely lightening up their positions ahead of Friday’s Non-Farm Payrolls Report.

The good news regarding the economy helped dampen growth concerns, pressuring Treasury Notes and Treasury Bonds. The pattern taking place in the September Treasury Bonds suggests a possible lower-top formation which could make Bonds vulnerable to a sell-off if the last swing bottom at 126’01 is violated.

Demand for gold has been rising since last week’s bottom. Investors should watch this market closely especially if stock indices weaken. The money leaving the equity markets will have to go somewhere and gold may be the place it lands. A weaker Euro is also likely to stimulate interest in gold as a hedge. December Gold is rapidly approaching a pair of downtrending Gann angles. They may stop the rally temporarily, but ultimately this market seems to be headed toward a major 50% level at 1215.00.

The British Pound is trading lower against the Dollar after better-than-expected U.S. economic reports regarding private payrolls and ISM manufacturing. The positive nature of both upbeat reports dampened worries about the U.S. economy’s growth.

The Sterling received its initial pressure after July services PMI posted an unexpected decline. The weakness in this number raised some concerns that the economy may be cooling down. Despite a recent rise in second quarter GDP and relatively high inflation, investors are still worried the new austerity measures combined with higher taxes will cool down the economy.

Along with the Sterling, the Euro was also down for the first day in close to a week. The weaker tone was set in the Euro following a worse-than-expected final July services PMI reading for the Euro Zone. The services purchasing managers index for the EZ rose slightly to 55.8, but fell short of a preliminary reading of 56.0.

In addition to the bearish economic reports, traders may be shedding Euros and Pounds ahead of tomorrow’s Bank of England and European Central Bank policy meetings on August 5. Both central banks are expected to keep interest rates unchanged at historically low levels. The BoE is going to address the effects of the new austerity measures and tax hikes on monetary policy and ECB President Trichet will discuss the surprise strength in the Euro Zone economy.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks Holding on to Gains Following Upbeat U.S. Economic Data

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 04 Aug 2010 16:15:00 GMT

U.S. equity markets are trading slightly higher following the release of an upbeat ADP Employment Report and a positive ISM manufacturing number. Investors have been churning the indices today as they sort out whether these reports represent an aberration or a change in trend. Traders may also be lightening up their positions ahead of Friday’s Non-Farm Payrolls Report.

The good news regarding the economy helped dampen growth concerns, pressuring Treasury Notes and Treasury Bonds.

Demand for gold has been rising since last week’s bottom. Investors should watch this market closely especially if stock indices weaken. The money leaving the equity markets will have to go somewhere and gold may be the place it lands. A weaker Euro is also likely to stimulate interest in gold as a hedge.

The U.S. Dollar is trading sharply higher against the Euro and British Pound and posting a strong gain versus the Japanese Yen after better-than-anticipated reports regarding private payrolls and ISM manufacturing. The positive nature of both upbeat reports dampened worries about the U.S. economy’s growth.

The weaker tone was set in the Euro following a weaker-than-expected final July services PMI reading for the Euro Zone. The services purchasing managers index for the EZ rose slightly to 55.8, but fell short of a preliminary reading of 56.0.

The British Pound received its initial pressure after July services PMI posted an unexpected decline. The weakness in this number raised some concerns that the economy may be cooling down. Despite a recent rise in second quarter GDP and relatively high inflation, investors are still worried the new austerity measures combined with higher taxes will cool down the economy.

In addition to the reports, traders may be shedding Euros and Pounds ahead of tomorrow’s Bank of England and European Central Bank policy meetings on August 5.

The Dollar/Yen is also posting a gain today. Traders are expressing relief in the upbeat economic numbers from this morning. This up move comes one day after the Japanese government issued a verbal invention to warn about the high Yen hurting exports.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

ADP Data shows Private Sector Employment Rose 42,000 in July

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 04 Aug 2010 11:15:00 GMT

U.S. stock futures indices are showing a slight rebound following a private employment report which showed a rise of 42,000 jobs in July. The U.S. Dollar strengthened slightly on the news, reversing the short-term trend. Treasury markets touched a new high for the session and December Gold briefly touched 1200.00.

Prior to this morning’s ADP Employment Data report, the Dollar was showing a slight upward bias and stocks were weaker due to a slightly weaker European July services report. The services PMI rose to 55.8 but fell short of pre-report guesses of 56.0. This morning the U.S. reports its July ISM non-manufacturing index at 9 a.m. central time.

This week the Dollar has been talking a beating against most major currencies on speculation the Fed will be forced to keep interest rates low and may have to renew its quantitative easing program. A series of poor U.S. economic news coupled with better than expected news from Europe has been the catalyst behind the weakness. Investors seeking higher yields have been driving equity markets higher in the wake of the weaker Greenback.

Overbought technical conditions and uncertainty heading into this Friday’s U.S. Non-Farm Payroll Report as well as disappointing earnings from Procter & Gamble helped drive the equity market lowers on Tuesday. Treasury Bonds and Gold firmed on Tuesday indicating that one of these asset classes will have to begin to give ground.

Today’s strong rally in gold may be an indication that money is beginning to flow into the precious medals markets. Uncertainty may be making gold an attractive hedge against a possible break in the paper asset stock market.

The key to today’s direction will be the Dollar and gold in my opinion. Traders should watch to see if investors begin to shed risky assets and turn to gold for a little protection. If this allocation begins to take place, then look for pressure to begin to build on the equity markets.

Tuesday Recap

U.S. equity markets lost some momentum on Tuesday as disappointing earnings and economic data pressured demand for equities. Stocks could never get on tract today following Monday’s impressive rally. Early weakness was triggered by disappointing earnings from Procter & Gamble. Later in the session, another series of weak economic news sealed the weakness for the day.

Technical and fundamental factors kept a lid on U.S. equity markets from the opening. The general feeling among technical investors is the markets have reached an overbought level. The lack of follow-through to the upside after Tuesday’s surge was attributed to the absence of key economic reports in Asia and Europe. In addition, the stronger Yen affected demand for higher yielding assets.

Talk that the Fed will be considering another round of quantitative easing helped to pressure Treasury debt instruments today as speculators bought T-Notes and T-Bonds ahead of next week’s Fed FOMC meeting. This has to be speculative buying as yields are already at record lows, leading some traders to believe the Fed’s hands are tied.

December Gold traded slightly better. Technical factors may have contributed to last week’s low and subsequent rally, but the strength the last two days could be part of an asset allocation process. Some speculators believe that money is going to begin to flow out of equities and into gold.

The U.S. Dollar was under pressure against most majors on Tuesday on speculation the Fed will consider renewing its quantitative easing program following next week’s FOMC meeting on August 10. Another round of weak economic data also contributed to the weakness in the Greenback which drove the Dollar to its lowest level since April against some of the currency pairs.

The Dollar opened lower and remained under pressure throughout the New York session, pressured by weak U.S. consumer spending news, a drop in home sales and a bigger than expected decline in factory orders.

The Greenback’s early morning weakness began following the release of a bearish article by the Wall Street Journal. According to the WSJ, the Fed will consider using cash from maturing mortgage-bond holdings to buy new mortgage or Treasury Bonds instead of allowing its portfolio to shrink. Insiders believe the Fed’s decision will be heavily weighted by this Friday’s U.S. Non-Farm Payrolls Report.

Some investors are questioning whether the Fed will follow-through on this symbolic event. The market has already pushed Treasury yields and mortgage yields to historic lows. Those traders who follow the interest rate differential believe the Dollar will continue to remain under pressure until interest rates begin to go up. Others believe that eventually the weakening U.S. economy will spread globally, triggering a flight to safety rally into the Dollar.

The Euro and British Pound remained strong throughout the day ahead of the Bank of England and European Central Bank policy meetings on August 5. Both central banks are expected to keep interest rates unchanged.

The BoE will report on the effects of the new austerity measures and tax hikes on current monetary policy. The big issue will be whether these reforms curtail growth. The ECB is likely to issue a statement on the state of the Euro Zone following the recent aid package to countries facing sovereign debt issues. Recently strong economic reports have surprised investors, many of whom believed the economy would slow down due to financial austerity measures.

Technically, the strong close in the Euro has the market in a position to test a long-term downtrending Gann angle from the 1.5144 top at 1.3394. Sellers may step in at this level. The British Pound tested a .618 retracement level at 1.5967. Buying seemed to dry up as the market neared this level indicating this market may have reached an overbought point.

Speculation that the weak U.S. economy will adversely affect the Canadian economy helped the September Canadian Dollar lose ground on Tuesday. The CAD traded in a tight range, indicating it may be going through a transition period. Although no topping signal has been given, the inability to rally this currency in the wake of bearish U.S. economic news may be a sign of either a shift in risk sentiment or position squaring ahead of this Friday’s U.S. and Canadian employment data.

The Japanese Yen gained despite the new that Japanese Minister Yoshihiko Noda said on Tuesday that excessive, disorderly moves in the foreign exchange market were undesirable and that too strong a Yen hurts exports and households. Market participants have heard this line before which may be the reason for the reaction. This form of verbal intervention didn’t work in the past to slow down the strength in the Yen and is not expected to do so now. It seems that only an actual intervention will force the Yen lower.

Finally, Monday night the Reserve Bank of Australia voted to leave interest rates unchanged at 4.5%. The main reason for this action was inline growth and inflation. The Aussie surged initially on the news but pulled back from its highs throughout the session. The consensus is the RBA is very content with keeping borrowing costs at current levels until the economic outlook become clearer.

Technically, the closing price reversal may be a sign of a top. The market will have to confirm the pattern with a break through .9070. This could start a 2 to 3 day break.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Disappointing Earnings, Economic Data Pressure Stocks

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 03 Aug 2010 20:45:00 GMT

U.S. equity markets lost some momentum on Tuesday as disappointing earnings and economic data pressured demand for equities. Stocks could never get on tract today following Monday’s impressive rally. Early weakness was triggered by disappointing earnings from Procter & Gamble. Later in the session, another series of weak economic news sealed the weakness for the day.

Technical and fundamental factors kept a lid on U.S. equity markets from the opening. The general feeling among technical investors is the markets have reached an overbought level. The lack of follow-through to the upside after Tuesday’s surge was attributed to the absence of key economic reports in Asia and Europe. In addition, the stronger Yen affected demand for higher yielding assets.

Talk that the Fed will be considering another round of quantitative easing helped to pressure Treasury debt instruments today as speculators bought T-Notes and T-Bonds ahead of next week’s Fed FOMC meeting. This has to be speculative buying as yields are already at record lows, leading some traders to believe the Fed’s hands are tied.

December Gold traded slightly better. Technical factors may have contributed to last week’s low and subsequent rally, but the strength the last two days could be part of an asset allocation process. Some speculators believe that money is going to begin to flow out of equities and into gold.

The U.S. Dollar was under pressure against most majors on Tuesday on speculation the Fed will consider renewing its quantitative easing program following next week’s FOMC meeting on August 10. Another round of weak economic data also contributed to the weakness in the Greenback which drove the Dollar to its lowest level since April against some of the currency pairs.

The Dollar opened lower and remained under pressure throughout the New York session, pressured by weak U.S. consumer spending news, a drop in home sales and a bigger than expected decline in factory orders.

The Greenback’s early morning weakness began following the release of a bearish article by the Wall Street Journal. According to the WSJ, the Fed will consider using cash from maturing mortgage-bond holdings to buy new mortgage or Treasury Bonds instead of allowing its portfolio to shrink. Insiders believe the Fed’s decision will be heavily weighted by this Friday’s U.S. Non-Farm Payrolls Report.

Some investors are questioning whether the Fed will follow-through on this symbolic event. The market has already pushed Treasury yields and mortgage yields to historic lows. Those traders who follow the interest rate differential believe the Dollar will continue to remain under pressure until interest rates begin to go up. Others believe that eventually the weakening U.S. economy will spread globally, triggering a flight to safety rally into the Dollar.

The Euro and British Pound remained strong throughout the day ahead of the Bank of England and European Central Bank policy meetings on August 5. Both central banks are expected to keep interest rates unchanged.

The BoE will report on the effects of the new austerity measures and tax hikes on current monetary policy. The big issue will be whether these reforms curtail growth. The ECB is likely to issue a statement on the state of the Euro Zone following the recent aid package to countries facing sovereign debt issues. Recently strong economic reports have surprised investors, many of whom believed the economy would slow down due to financial austerity measures.

Technically, the strong close in the Euro has the market in a position to test a long-term downtrending Gann angle from the 1.5144 top at 1.3394. Sellers may step in at this level. The British Pound tested a .618 retracement level at 1.5967. Buying seemed to dry up as the market neared this level indicating this market may have reached an overbought point.

Speculation that the weak U.S. economy will adversely affect the Canadian economy helped the September Canadian Dollar lose ground on Tuesday. The CAD traded in a tight range, indicating it may be going through a transition period. Although no topping signal has been given, the inability to rally this currency in the wake of bearish U.S. economic news may be a sign of either a shift in risk sentiment or position squaring ahead of this Friday’s U.S. and Canadian employment data.

The Japanese Yen gained despite the new that Japanese Minister Yoshihiko Noda said on Tuesday that excessive, disorderly moves in the foreign exchange market were undesirable and that too strong a Yen hurts exports and households. Market participants have heard this line before which may be the reason for the reaction. This form of verbal intervention didn’t work in the past to slow down the strength in the Yen and is not expected to do so now. It seems that only an actual intervention will force the Yen lower.

Finally, last night the Reserve Bank of Australia voted to leave interest rates unchanged at 4.5%. The main reason for this action was inline growth and inflation. The Aussie surged initially on the news but pulled back from its highs throughout the session. The consensus is the RBA is very content with keeping borrowing costs at current levels until the economic outlook become clearer.

Technically, the closing price reversal may be a sign of a top. The market will have to confirm the pattern with a break through .9070. This could start a 2 to 3 day break.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Technical, Fundamental Factors Keep Lid on Equity Advance

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 03 Aug 2010 16:15:00 GMT

Technical and fundamental factors are keeping a lid on U.S. equity markets at the mid-session. The general feeling among technical investors is the markets have reached an overbought level. The lack of follow-through to the upside after yesterday’s surge can be attributed to the absence of key economic reports in Asia and Europe. In addition, the stronger Yen is affecting demand for higher yielding assets.

Talk that the Fed will be considering another round of quantitative easing is helping to pressure Treasury debt instruments today as speculator by T-Notes and T-Bonds ahead of next week’s Fed FOMC meeting.

December Gold is trading slightly better. Technical factors may have contributed to last week’s low and subsequent rally, but the strength the last two days could be part of an asset allocation process. Some speculators believe that money is going to begin to flow out of equities and into gold.

The U.S. Dollar is under pressure against most majors on speculation the Fed will consider restarting its quantitative easing program following next week’s FOMC meeting on August 10.

According to the Wall Street Journal, the Fed will consider using cash from maturing mortgage-bond holdings to buy new mortgage or Treasury Bonds instead of allowing its portfolio to shrink. Insiders believe the Fed’s decision will be heavily weighted by this Friday’s U.S. Non-Farm Payrolls Report.

The Euro and British Pound remained strong at the mid-session ahead of the Bank of England and European Central Bank policy meetings on August 5. Both central banks are expected to keep interest rates unchanged. The BoE will report on the effects of the new austerity measures and tax hikes on current monetary policy. The big issue will be whether these reforms curtail growth. The ECB is likely to issue a statement on the state of the Euro Zone following the recent aid package to countries facing sovereign debt issues. Recently strong economic reports have surprised investors, many of whom believed the economy would slow down due to financial austerity measures.

The Dollar remained under pressure throughout the morning, pressured by weak U.S. consumer spending news, a drop in home sales and a bigger than expected decline in factory orders.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Overbought Conditions Could Trigger Weaker Stock Market Opening.

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 03 Aug 2010 11:15:00 GMT

If overnight trading action is any indication then look for U.S. equity markets to open lower. The lack of buying interest overnight is most likely a reflection of short-term overbought trading conditions and the lack of fresh economic news. The Dollar is still under pressure against the Euro and British Pound, but equity traders are a little disconnected from this move this morning.

Treasury futures are trading better overnight. The Wall Street Journal is reporting that the Fed is likely to consider renewing its quantitative easing program. This will include buying Treasury Bonds. Traders are buying T-Bonds and T-Notes in anticipation of the announcement at the Fed meeting on August 10th.

December Gold is trading higher overnight. The main trend is down, but the strong rally off a key 50% price level last week indicates that strong buyers may be behind this move. The rally in Treasury Bonds and Gold are strong indications that a stock market top is near. In my opinion there is no way these three asset classes can compete for the same investment dollar without one collapsing.

Improving economic outlooks for both the Euro Zone and U.K. are helping to boost the Euro and British Pound versus the Dollar overnight. Both currencies continue to soar to the upside, driven by strong trend buying and the lack of overhead resistance.

Poor U.S. economic data and expectations that U.S. growth could lose momentum as government stimulus is withdrawn has led investors to speculate that U.S. interest rates will stay low for a prolonged period of time.

Even the Wall Street Journal supports the notion that the Federal Reserve will consider using cash the Fed receives when its mortgage-backed holdings mature to buy new mortgage or Treasury Bonds, instead of allowing its portfolio to shrink gradually, as it is expected to do in the months ahead.

At its next policy meeting on August 8, analysts expect the Fed members to mull over ways to stimulate the economy including quantitative easing. This action by the policymakers will be a signal that there is a deepening concern among members about the economic outlook.

Before the Fed meets, the Bank of England and the European Central Bank will have a chance to express their outlooks for their respective economies on August 5. The BoE is expected to keep its borrowing costs at historically low levels while explaining how monetary policy and growth will be affected by the recently imposed austerity measures and tax increases. The ECB will also leave interest rates unchanged at 1%, but should offer a solid explanation for the recent surge in economic growth despite talk of a slow down due to sovereign debt issues only two months ago.

No matter how you look at the central bank meetings, it is clear that the market believes that both the BoE and ECB are closer to raising interest rates than the U.S. Fed.

Overnight the U.S. Dollar hit multi-month lows against most major currencies, some of which had not been seen since mid-April. Negative sentiment is building which could send the Dollar even lower today as pessimism about the economy continues to build.

Some of the pessimism about the economy was fueled by Fed Chairman Bernanke on Monday when he told a group that the economy has yet to recover fully and monetary policy must remain accommodative. Bernanke also said it is going to take “significant time” to restore the labor market.

In other news, the Dollar is losing ground to the Japanese Yen despite news that Japanese Minister Yoshihiko Noda said on Tuesday that excessive, disorderly moves in the foreign exchange market were undesirable and that too strong a Yen hurts exports and households. Market participants have heard this line before which may be the reason for the reaction. This form of verbal intervention didn’t work in the past to slow down the strength in the Yen and is not expected to do so now. It seems that only an actual intervention will force the Yen lower.

Finally, last night the Reserve Bank of Australia voted to leave interest rates unchanged at 4.5%. The main reason for this action was inline growth and inflation. The Aussie surged initially on the news but pulled back from its highs throughout the session. The consensus is the RBA is very content with keeping borrowing costs at current levels until the economic outlook become clearer.

Monday Recap

Stock indices extended their gains on Monday boosted by a strong outlook for the global economy. In the meantime, the outlook for the U.S. recovery weakened as July PMI fell and Fed Chairman Bernanke expressed his concerns for labor and housing.

News of an improving global economy sent global equity markets sharply higher in a rally that never looked back. Stronger global PMI reports drove up demand for risky assets as traders begin to price in a weakening U.S. economy.

Traders seeking higher return on their investments sold the lower yielding Dollar and Treasury instruments to take advantage of the strong rally in equity markets today. The rally began overnight in Asia and quickly spread to Europe. U.S. traders, who have had ample opportunities to buy equities on dips during the past week, chased the market higher from the opening.

The rally on Monday was led by large multinational companies who will benefit from a strong global recovery. Financial stocks also contributed to the strength in the indices now that it has been generally accepted that the European bank stress tests revealed nothing of significance for the sector.

September E-mini S&P 500 traders are trying to drive this market through the last main top on the weekly chart at 1129.50. A push through this price will turn the main trend to up on the weekly chart and indicate further upside.

The market may continue to rally early in the week but upside momentum could slow ahead of Friday’s Non-Farm Payrolls Report.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks Extend Gains boosted by Strong Global Outlook

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 02 Aug 2010 20:45:00 GMT

Stock indices extended their gains on Monday boosted by a strong outlook for the global economy. In the meantime, the outlook for the U.S. recovery weakened as July PMI fell and Fed Chairman Bernanke expressed his concerns for labor and housing.

News of an improving global economy sent global equity markets sharply higher in a rally that never looked back. Stronger global PMI reports drove up demand for risky assets as traders begin to price in a weakening U.S. economy.

Traders seeking higher return on their investments sold the lower yielding Dollar and Treasury instruments to take advantage of the strong rally in equity markets today. The rally began overnight in Asia and quickly spread to Europe. U.S. traders, who have had ample opportunities to buy equities on dips during the past week, chased the market higher from the opening.

The rally on Monday was led by large multinational companies who will benefit from a strong global recovery. Financial stocks also contributed to the strength in the indices now that it has been generally accepted that the European bank stress tests revealed nothing of significance for the sector.

September E-mini S&P 500 traders are trying to drive this market through the last main top on the weekly chart at 1129.50. A push through this price will turn the main trend to up on the weekly chart and indicate further upside.

The market may continue to rally early in the week but upside momentum could slow ahead of Friday’s Non-Farm Payrolls Report.

The U.S. Dollar suffered huge losses against most major currencies following overnight news regarding a strengthening global economy and weaker U.S. business conditions in July. Fed Chairman Bernanke added to the bearishness by painting a gloomier forecast for the economy.

Strength in the global manufacturing sector gave investors little reason to lock up lower yields, driving investors into higher yielding assets. The report also forced investors to question the strength of the U.S. recovery.

The key question remains, how long will investors continue to seek risk? At some point, like they have in the past, investors will turn risk averse, seeking protection in the lower yielding Dollar and Yen. With the U.S. Non-Farm Payrolls Report due on Friday, the current break in the Dollar may be investors piling on for an exhaustive break which may come to a screeching halt if the U.S. jobs number comes out weaker than expected. Right now the break in the Dollar appears to be too easy with no big stopper in the way.

The Euro surged to the upside as investors had little choice but to buy the European currency following strong PMI reports from across Europe. All of the news seems to be centering on developing strength in Europe and continued weakness in the U.S. Technically the Euro is on pace to test the late April main top at 1.3342.

The British Pound posted a huge gain ahead of the Bank of England policy meeting on August 5. Interest rates are expected to remain at historically low levels, but the BoE will have its first chance to address the economy since the implementation of new austerity measures. The primary concern for the central bank at this time will be whether the austerity measures and the upcoming tax increases will have a negative effect on the economy. The BoE also has to address its current monetary policy in the wake of the recent strength in the Second Quarter GDP and inflation.

The main trend is up in the British Pound. The next upside objective is the .618 retracement level at 1.5967. Traders should be aware that the type of chart pattern taking place often ends in a closing price reversal top.

Fed Chairman Bernanke did not help matters much for the Dollar on Monday as he reiterated his weak assessment for the economy particularly labor and the housing market.

The size of the current rally in the currencies has taken some traders by surprise. Only two months ago, there were forecasts calling for a weak European economy because of sovereign debt issues and new financial austerity measures. In addition, the possibility of debt defaults threatened the very existence of the Euro. Many investors believed that Europe would slash itself back into a recession. This has not been the case however, as business and consumer confidence is up as well as manufacturing. It looks as if the whole Euro region has rallied around the ECB’s decision to shore up finances and provide aid when needed.

While the Dollar continues to get punished in moves we haven’t seen since late 2009, traders should be aware that the type of punishment the Greenback is enduring may come to a fast halt if the U.S. employment report on Friday reveals a ray of light for the economy. Investors should also be aware that a weaker than expected report may be the trigger that sends traders back to the safety of the Dollar. Either way it looks as if the Dollar is approaching a level which could produce a rapid turnaround. Technically, oversold conditions could limit short-selling. Fundamentally, a weakening U.S. economy may curtail the global recovery.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Improving Global Economy Sends Equities Soaring

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 02 Aug 2010 16:15:00 GMT

News of an improving global economy is sending global equity markets sharply higher at the mid-session. Stronger global PMI reports are driving up demand for risky assets as traders begin to price in a weakening U.S. economy.

Traders seeking higher return on their investments are selling the lower yielding Dollar and Treasury instruments to take advantage of the strong rally in equity markets today. The rally began overnight in Asia and quickly spread to Europe. U.S. traders, who have had ample opportunities to buy equities on dips during the past week, chased the market higher from the opening.

September E-mini S&P 500 traders are trying to drive this market through the last main top on the weekly chart at 1129.50. A push through this price will turn the main trend to up on the weekly chart and indicate further upside.

The market may continue to rally early in the week but upside momentum could slow ahead of Friday’s Non-Farm Payrolls Report.

The U.S. Dollar remains under pressure at the mid-session following overnight news regarding a strengthening global economy and weaker U.S. business conditions in July.

Strength in the global manufacturing sector gave investors little reason to lock up lower yields, driving investors into higher yielding assets. The report also forced investors to question the strength of the U.S. recovery.

The key question remains, how long will investors continue to seek risk? At some point, like they have in the past, investors will turn risk averse, seeking projection in the lower yielding Dollar and Yen.

The Euro surged to the upside as investors had little choice but to buy the European currency following strong PMI reports from across Europe. All of the news seems to be centering on developing strength in Europe and continued weakness in the U.S.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Dow Set to Open 100 Points Higher on Strong Global Risk Demand

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 02 Aug 2010 11:15:00 GMT

Global equity markets surged overnight leading to the call for a sharply higher U.S. stock market opening. The markets received a boost from a strong rally in the Asian stock markets following good manufacturing news from Australia and China. Although the news from China showed a decline in a private purchasing managers’ index, the number remained above 50 indicating the sector was still strong. China’s Purchasing Mangers’ Index fell to 51.2 from 52.1 in June. Australia’s manufacturing index rose 1.5 points to 54.4.

The inability to break the equity markets on Friday following a lower than expected GDP report is also a driving force this morning. Second quarter GDP was reported at 2.4% following guesses of 2.5% to 2.7%, however first quarter GDO was revised higher.

Some analysts are a bit surprised by the overnight strength. Many had expected a cool-down in the markets following the strong rally in July and this Friday’s employment report.

This morning Fed Chairman Bernanke is going to speak at the 64th Annual Southern Legislative Conference in Charleston, South Carolina. Traders will be listening to hear if Bernanke reiterates some of the comments he made before a Senate committee two weeks ago when he called for a slow down in the economy and the employment situation.

This morning, traders will get the chance to react to fresh construction spending news and the July ISM Index. Construction spending is expected to show a decline. The ISM Index is expected to remain above 50, but down from 56.2 in June. This report will indicate a drop in the pace of the expansion.

The main driving force behind the equity market rally overnight is demand for risk. Recent reports have been showing that the global economy is growing while the U.S. economy is struggling. Because of this situation interest rate yields have been falling, driving investors into higher yielding currencies, commodities and stocks.

Traders will soon have to decide whether the weak U.S. economy will trigger a drive into the Dollar again because of risk aversion. This move will once again pressure equity markets. In addition to worries about risk, investors have to deal with this Friday’s U.S. Non-Farm Payrolls Report. Early calls are for a lower number.

Treasury markets are trading lower this morning after a strong surge last week. Traders are shedding less risky assets in favor of higher-yielding equities. Gold is trading mixed to lower because of greater demand for currencies.

The U.S. Dollar is under pressure against most majors as investor concern that the U.S. economy’s recovery is losing steam drove traders into higher yielding assets. The overnight weakness in the Dollar was triggered by a better than expected economic report in Australia and a strong surge in Asian equities.

The Dollar has been under pressure lately because of a string of weak economic data while the Euro Zone economy has been showing signs of strength, driving investors into riskier assets. Another concern at this time is how long the weaker U.S. economy will continue to drive investors into the higher yielding currencies. At some point, global investors will turn their focus once again to the Dollar because of risk aversion worries.

The Australian Dollar rose to its strongest level in three months on signs that Asian economic growth continues to remain strong despite predictions of a slow down in China. Australian traders turned bullish after the manufacturing index in Australia rose 1.5 points to 54.4. Speculative traders are also looking for tomorrow’s Australian retail sales and building approvals to show advances for June.

On August 3, the Reserve Bank of Australia is expected to leave interest rates unchanged for the third straight month. Traders will be watching the policy statement for any signs that the RBA will resume its tightening campaign later in the year. The central bank may have to take action against a possible spike in inflation due to projected strength in the economy for late 2010 and early 2011.

Technically the Aussie continues in an uptrend. The drive through the last swing top at .9068 was reaffirmed overnight. A new higher swing bottom was formed at .8904. Continue to look for the trend to continue as long as there are higher-tops and higher-bottoms.

Although China’s Purchasing Managers’ Index was down in July versus June, the reading remained above 50 showing expansion. New Zealand Dollar traders read this a sign that demand for goods and services will remain strong. The Kiwi followed through to the upside after Friday’s minor reversal bottom. Strong upside momentum indicates the market may have enough juice to challenge the last main top at .7395. The main trend remains up with a strong chance a new higher swing bottom will form at .7190.

The British Pound is the strongest gainer overnight. Traders are buying the Sterling ahead of this week’s Bank of England interest rate decision. Most investors expect the central bank to leave interest rates unchanged but the key focus will be on the BoE’s outlook for inflation. The new inflation outlook will be the central banks first since the government implemented financial austerity measures. The BoE is expected to give its assessment on the effects of the financial austerity measures on monetary policy and economic growth going forward.

Technically, now that the British Pound has cleared a key 50% retracement level, upside momentum is expected to drive the market to the .618 retracement level at 1.5967 before encountering new resistance. Continue to look for higher markets as long as 1.5635 holds as support. The strong rise in the Sterling has this market in a position to post a daily closing price reversal top. Bearish traders should watch for this formation to form on either an intra-day or daily basis.

Demand for higher risk assets is driving the September Japanese Yen lower after this currency reached a new high for the year on Friday. The strong rise in the equities has reignited interest in the carry-trade, fueling a sell-off in the Japanese Yen.

This week the Australian Central Bank meets on August 3, followed by the European Central Bank and the Bank of England on August 5. All three central banks are expected to leave interest rates unchanged. Following the release of their respective policy statements, traders will turn their focus toward the release of the July U.S. Non-Farm Payrolls Report.

This report will be important because Dollar sellers will have to decide whether to keep the pressure on the Greenback because of a weak economy or begin to cover their shorts because of risk aversion.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

T-Bonds and Gold Signal Impending Stock Market Break

jhyerczyk@yahoo.com (James A. Hyerczyk) — Fri, 30 Jul 2010 20:45:00 GMT

Treasury futures rallied in flight-to-safety buying as yields in the 30-Year Bonds and 10-Year Notes plunged. Expectations are the Fed is likely to keep interest rates down for a prolonged period of time. Despite the early recovery in the equity markets, the Treasurys held their ground, suggesting that there is real concern about the condition of the economy. The fact that Fed officials are backing the call for a weaker economy is the key driving force behind the move in the Treasury instruments. Traders have decided that the Fed is likely to keep pressure on interest rates until the economy can turn around.

Something has to give in either the equity or fixed income markets. The T-Bonds and T-Notes seem to be the best indicator of the state of the economy. This means that the pressure should be on the equities.

The fact that December Gold rallied on Friday is a strong sign that money is leaving the paper assets (stocks) and being reinvested in the hard assets (gold). Although gold could not post a weekly closing price reversal bottom, the pattern looks positive for the start of a retracement rally. All it needs right now to trigger a rally is a weaker Euro and stock market.

U.S. stock indices traded lower following the release of a weaker than expected U.S. Second-Quarter GDP report, but quickly turned positive after value-seekers stepped up to buy at cheaper prices. After the initial surge, the markets stalled, setting up the possibility of a lower trade into the close. Trading conditions continue to remain volatile as traders jockey for position into the end-of-the-month close.

Technically the September E-mini S&P 500 closed lower for the week, setting up the possibility of a weekly closing price reversal. A confirmation of this pattern suggests the start of a 2 to 3 week correction back to 1060.75 to 1047.00. This morning’s rally stopped short at last week’s close at 1100.50, indicating that the Bears are defending this price level.

This week the September Euro penetrated the 1.31 price level for the first time since May. The primary driving forces behind this move were the better outlook for the Euro Zone economy and the weak outlook for the U.S. economy. The data out of Europe may have brought the European Central Bank closer to a rate hike than the Fed.

The September British Pound closed near the high for the week after piercing a major 50% price level. The strong close put the market over 50% of the 1.7042 (July 2009 Top) to the 1.4229 (May 2010 Bottom) range at 1.5635.

Weak U.S. economic data and a better outlook for the U.K. economy are the reasons for the strength in the Sterling. While the U.S. is still on a spending spree, the U.K. has been busy implementing austerity measures while reading for tax hikes. Bullish traders seem optimistic that these two factors are good for the economy but some traders remain skeptical that spending cuts and tax increases will curtail the economic recover.

Comments from the Bank of England this week seem to suggest that it remains cautious about the economy and is willing to continue to provide stimuli if and when necessary. Recently it was reported that the U.K. GDP rose more than expected. This provided some lift to the market but poor housing numbers seem to indicate that the central bank is still far from hiking rates.

The Australian Dollar finished near its high for the week after a two-day setback. Demand for higher risk assets was the driving force behind the rally. Earlier in the week, the Aussie weakened because CPI data suggested the economy had cooled off. This meant that the Reserve Bank of Australia would most likely refrain from hiking interest rates at its next meeting on August 3rd. Friday’s rally suggests that speculators are driving up the market because of the weak U.S. economy and the likelihood that U.S. interest rates will remain at historically low levels for a prolonged period of time.

The New Zealand Dollar closed higher on Friday after a closing price reversal top earlier in the week triggered a 3 day, 50% correction. This move is typical during a rally. The main problem, however, which suggests lower markets to follow, is the weekly closing price reversal top.

Fundamentally, the Reserve Bank of New Zealand hiked its benchmark interest rate by a quarter-point to 3.00%. The RBNZ, however, said it would most likely refrain from another rate hike because of expectations of slower growth. This news triggered the sell-off in the Kiwi. Technically, the reversal top could be a bearish sign if confirmed. The chart suggests a possible correction to .6980 over the next 2 to 3 weeks.

The U.S. Dollar traded mostly higher against most major currencies overnight but gave up some of its earlier gains early in the New York session, turning negative against the British Pound, Australian Dollar, Canadian Dollar and New Zealand Dollar while only giving up ground to the Euro and Swiss Franc. The Dollar traded weaker versus the Japanese Yen all trading session.

This morning the U.S. GDP Report showed the economy grew at 2.4% in the second quarter. This growth was at a pace somewhat slower than pre-report estimates of 2.5% to 2.7%. A first quarter revision higher may have been the reason for the limited reaction to the downside in the equity markets and the reason why the rally stalled in the Dollar.

The biggest concern at this time amongst investors is the uncertainty of future growth. Continuing to lose growth at the current pace suggests the U.S. GDP may fall below 2% during the third quarter. This uncertainty is one of the main reasons why employers may be curtailing hiring, thereby exasperating the employment situation in this country.

In other reports, the Michigan confidence index was revised to 67.8 in July and manufacturing activity in Chicago rose more than expected. The Dollar was able to hold its ground following the release of both reports.

The overnight strength in the Dollar against the majors except the Japanese Yen was triggered by weak Japanese economic news. Overnight it was reported that Japanese core consumer prices fell 1% from a year ago. May industrial production and employment were also negatives.

The Dollar strengthened further after Fed voting member Bullard said the U.S. “is closer to a Japanese-style outcome today than at any time in recent history”. He also said the best remedy for this developing problem will be another round of Treasury purchases by the Fed.

Stocks were expected to trade lower today, but a quick rally following the opening, triggered by value-seeking bottom pickers helped drive the equity indices higher. This forced short-covering rallies in both the New Zealand Dollar and Australian Dollar.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks Volatile; Treasuries Hold Gains

jhyerczyk@yahoo.com (James A. Hyerczyk) — Fri, 30 Jul 2010 16:15:00 GMT

U.S. stock indices traded lower following the release of a weaker than expected U.S. Second-Quarter GDP report, but quickly turned positive after value-seekers stepped up to buy at cheaper prices. After the initial surge, the markets stalled, setting up the possibility of a lower trade into the close. Trading conditions continue to remain volatile as traders jockey for position into the end-of-the-month close.

Technically the September E-mini S&P 500 is trading lower for the week, setting up the possibility of a weekly closing price reversal. A confirmation of this pattern suggests the start of a 2 to 3 week correction back to 1060.75 to 1047.00. This morning’s rally stopped short at last week’s close at 1100.50, indicating that the Bears are defending this price level.

Treasury futures rallied in flight-to-safety buying as yields in the 30-Year Bonds and 10-Year Notes plunged. Expectations are the Fed is likely to keep interest rates down for a prolonged period of time. Despite the early recovery in the equity markets, the Treasurys held their ground, suggesting that there is real concern about the condition of the economy. The fact that Fed officials are backing the call for a weaker economy is the key driving force behind the move in the Treasury instruments. Traders have decided that the Fed is likely to keep pressure on interest rates until the economy can turn around.

The U.S. Dollar traded mostly higher against most major currencies overnight but gave up some of its earlier gains, turning negative against the British Pound, Australian Dollar and New Zealand Dollar while losing ground to the Euro, Canadian Dollar and Swiss Franc. The Dollar has been trading weaker versus the Japanese Yen all trading session.

This morning the U.S. GDP Report showed the economy grew at 2.4% in the second quarter. This growth was at a pace somewhat slower than pre-report estimates of 2.5% to 2.7%. A first quarter revision higher may have been the reason for the limited reaction to the downside in the equity markets and the reason why the rally stalled in the Dollar.

The biggest concern at this time amongst investors is the uncertainty of future growth. Continuing to lose growth at the current pace suggests the U.S. GDP may fall below 2% during the third quarter. This uncertainty is one of the main reasons why employers may curtail hiring, thereby exasperating the employment situation in this country.

In other reports, the Michigan confidence index was revised to 67.8 in July and manufacturing activity in Chicago rose more than expected. The Dollar was able to hold its ground following the release of both reports.

The overnight strength in the Dollar against the major except the Japanese Yen was triggered by weak Japanese economic news. Overnight it was reported that Japanese core consumer prices fell 1% from a year ago. May industrial production and employment were also negatives.

The Dollar strengthened further after Fed voting member Bullard said the U.S. “is closer to a Japanese-style outcome today than at any time in recent history”. He also said the best remedy for this developing problem will be another round of Treasury purchases by the Fed.

Stocks were expected to trade lower today, but a quick rally following the opening, triggered by value-seeking bottom pickers helped drive the equity indices higher. This forced short-covering rallies in both the New Zealand Dollar and Australian Dollar.

If U.S. equity markets turn lower late in the session, then look for traders to become risk averse. This is likely to help the Dollar regain its upside bias while pressuring risk-sensitive currencies.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

GDP Up 2.4%; Economy Growing Slowly; Stocks Called Lower

jhyerczyk@yahoo.com (James A. Hyerczyk) — Fri, 30 Jul 2010 11:15:00 GMT

U.S. economic growth slowed during the second quarter more than economist estimates, pressuring equity markets before the opening. Expectations were for a rise of 2.5% to 2.7%. The actual GDP figure was an increase of 2.4%. Stocks fell on the news as investors shed risky assets.

Treasury futures rallied in flight-to-safety buying as yields in the 30-Year Bonds and 10-Year Notes plunged. Expectations are the Fed is likely to keep interest rates down for a prolonged period of time.

The Dollar is trading higher against most major currencies with the exception of the Japanese Yen. Traders are leaving the higher risk and commodity-linked currencies this morning and seeking shelter in the lower yielding Dollar and Yen. Some traders believe the slowdown in the U.S. economy will curtail the global economic recovery.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stock Markets Tumble after Fed’s Fisher Reiterates Economic Weakness

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 29 Jul 2010 20:45:00 GMT

U.S. equity markets tumbled shortly after the opening after Dallas Fed President Fisher reiterated that the economy was weak. In an early morning speech Fisher said that growth from the first quarter on is “likely to fall below 3 percent for a prolonged period.” This comment didn’t sit well with investors who used it as an excuse to shed risky stock positions ahead of Friday’s well-anticipated Gross Domestic Product report.

Fisher’s comments covered a few major sectors, making the decline broad-based. His comments pressured the technology when he said software and equipment purchases “are closer to catching up with demand”. He cited weak manufacturing growth. Fisher called the housing market “dyspeptic”. He mentioned consumer anxiety. The sum of all of these previously mentioned factors “point to a slightly weaker national outlook”.

The trend is up in the Treasury markets but investors took a caution approach to the long side even though stocks weakened. Watch the September T-Bonds and T-Notes after the GDP report is released. A worse than expected report is likely to trigger a flight-to-safety rally in the Treasurys. A better than expected number is likely to lead to a sell off. At this time Treasury traders have priced in an annual rate growth of 2.5% to 2.7%. Depending on how much the actual number misses this range will determine the volatility in these markets.

Tomorrow the U.S. will release its preliminary Second-Quarter GDP Data. Investors are looking for this report to reveal a softening economy. Analysts expect U.S. GDP slowed last quarter to an annual rate of 2.5% from 2.7% in the first. A number showing a greater than expected decrease could drive equity and commodity markets sharply lower, setting off the possibility of a major flight to quality rally in the Dollar. Given the recent slew of weak economic data and dim outlook for the economy by Fed Chairman Bernanke, this is one report that should be watched carefully.

The Dollar was under pressure most of the day on Thursday. The Greenback opened lower against the major currencies but gained back a little after Dallas Federal Reserve President Richard Fisher said economic growth is likely to remain below 3% for a “prolonged period”. He also added that there would be a slow and “bumpy” improvement in jobs but without a second downturn.

Fisher’s information was not really fresh news. His comments seemed to reiterate the Fed’s assessment in its minutes from earlier in the month and Fed Chairman Bernanke’s testimony before the Senate a couple of week’s later. Traders may have overreacted in the equity markets today, but the move in the Dollar was expected. Furthermore, the fact that the Dollar strengthened a bit after the comments is an indication that a worse than expected GDP report on Friday could renew a flight-to-safety rally in the Dollar.

The Euro surged to 1.3105 for the first time since May shortly after U.S. equity markets opened, but was unable to hold this level as stocks corrected sharply during the trading session. The subsequent break triggered volatile moves throughout the session with the market retracing inside the 1.3105 to 1.3059 range several times.

The EUR USD began to break out to the upside last night buoyed by strong European earnings reports and the dim outlook for the U.S. economy. Some traders are factoring in the possibility that the European Central Bank may be in a position to raise its benchmark interest rate before the Fed acts upon the U.S. borrowing rate.

Technically the Euro is in a strong uptrend. The breakout above the last swing top at 1.3028 reaffirmed the trend as well as the crossing of the .618 retracement level at 1.2998. In order to sustain this rally, the currency has to close above 1.2998.

The British Pound traded higher but barely held on to earlier gains following a test of a major 50% level at 1.5635. Slowing the Sterling’s upside momentum today is a U.K. housing price report which showed that home values fell in July for the first time in five months. Tighter lending conditions and concerns that government spending cuts will slow economic growth were to blame for the drop.

Last week it was reported that the U.K. economy grew more than expected during the Second Quarter but that was before the implementation of new government austerity measures. Concerns that new taxes and spending cuts will hurt the economy could be the factors which contribute to the start of a short-term decline. Technically, investors should begin to watch for a technical closing price reversal top to signal the end of the current rally. At a time today, the Sterling was close to forming a reversal top, but bargain hunters were buying aggressively on the dips.

The New Zealand Dollar traded weaker versus the U.S. Dollar after the Reserve Bank of New Zealand hiked its key lending rate by 25 basis points to 3.00%. Although this hike was expected, the main reason behind the weakness is the comment from RBNZ Governor Alan Bollard. The central bank Governor stated after the report that the “pace and extent” of future increases would be more moderate than earlier projected. Investors read this a sign that the central bank will refrain from an additional rate hike at its next meeting on September 15.

Technically the Kiwi reached its closing price reversal top objective at .7211. A normal reaction to this pattern is a 2 to 3 day decline of 50% of the last swing up. Further weakness will be indicated if .7211 fails to hold as support. Weakness in U.S. equities may trigger a further decline on Friday.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks Lower in Volatile Session

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 29 Jul 2010 16:15:00 GMT

U.S. equity markets rallied on the opening following a strong move overnight which was bolstered by better earnings reports in Europe. This morning’s better than expected weekly initial claims report added additional support.

Buying quickly staled shortly after the initial thrust, triggering a hard correction in the equity futures markets which drove the indices through yesterday’s low. A new main top was formed at 1118.75, but the uptrend remains intact. The market is now trading lower for the week, setting up the possibility of a weekly closing price reversal top.

Over the short-run, traders should look for a minimum retracement into 1084.75 to 1076.75. Longer-term traders should watch for a correction to 1060.75 to 1047.00.

September Treasury Bonds reached their lowest level of the day shortly after equity markets topped. T-Bonds accelerated to the upside as the stock futures indices broke sharply to the downside. Based on Wednesday’s closing price reversal bottom formation, T-Bonds may rally to 128’00 over the next 2 to 3 days. Traders will gain confidence in this forecast if equity markets post a sharp break late in the trading session.

The Euro surged to 1.3105 for the first time since May shortly after U.S. equity markets opened, but was unable to hold this level as stocks corrected sharply during the trading session. The subsequent break triggered volatile moves throughout the session with the market retracing inside the 1.3105 to 1.3059 range several times.

The September Euro began to break out to the upside last night buoyed by strong European earnings reports and the dim outlook for the U.S. economy. Some traders are factoring in the possibility that the European Central Bank may be in a position to raise its benchmark interest rate before the Fed acts upon the U.S. borrowing rate.

Technically the Euro is in a strong uptrend. The breakout above the last swing top at 1.3028 reaffirmed the trend as well as the crossing of the .618 retracement level at 1.2998. In order to sustain this rally, the currency has to close above 1.2998.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Euro Surge Triggers Stock Market Rally

jhyerczyk@yahoo.com (James A. Hyerczyk) — Thu, 29 Jul 2010 11:15:00 GMT

Investors worried about the weakening U.S. economy and a positive response to European earnings reports are pressuring the Dollar this morning leading to a strong recovery in the equity markets after a sell-off on Wednesday threatened the structure of the current rally. U.S. equity markets broke sharply late in the trading session following a bearish durable goods report yesterday morning and a not-so-bright outlook for the economy according to the Fed’s Beige Book late in the session.

Prior to the durable goods report economists were looking for an increase of 1.0%, the actual report showed a drop of 1.0%. This news combined with an overbought situation triggered a break early in the session which took out yesterday’s low but held last week’s close. Following a delayed reaction to the Beige Book numbers, longs threw in the towel and stock indices broke. The sell-off in the September E-mini S&P 500 and September E-mini NASDAQ erased all of this week’s gains before settling slightly above Wednesday’s low.

Overnight stock index futures regained close to 50% of the correction from the top leading to this morning’s higher markets and a possible follow-through to the upside following the opening.

Technically it looked as if breaking last week’s low would trigger an acceleration to the downside but this appears not to be the case as investors shrugged off the move and gobbled up stocks on the decline. This move showed that despite diminishing upside momentum and overbought conditions, investors are still value driven.

The bearish durable goods report could be called a momentum buster as investors have gotten a little too comfortable with the pace of the current rally. This market is resilient however which means it is going to take more than a weak durable goods report to break it from current levels.

Today traders will have the chance to react to an earnings report from Exxon and this week’s initial claims report. Before the opening, Exxon is expected to report second-quarter earnings of $1.46 per share and revenue of $96.86 billion.

Today’s initial jobless claims report is expected to show that claims fell for the third time in four weeks last week. If the report comes out as expected, equities may feel some heat if investors decide that this report is a strong indication of an improving jobs picture.

The weak U.S. economic data coupled with the sell-off in equities helped trigger reversal bottoms in both the September Treasury Bonds and Treasury Notes on Wednesday despite another government auction which increased available supply. Yesterday’s technical pattern suggests the start of a 2 to 3 day rally.

The Treasurys are trading mixed this morning with T-Bonds down and T-Notes trading slightly better. Demand for equities could trigger a break, but the most important item to watch will be the initial claims report. A better than expected report will pressure the Treasurys while a worse than expected report is likely to trigger a flight-to-safety rally into T-Bonds and T-Notes.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks Wipe Out Weekly Gains; Possible Reversal Top in the Making

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 28 Jul 2010 20:45:00 GMT

U.S. equity markets broke sharply late in the trading session following a bearish Durable goods report this morning and a gloomy outlook for the economy according to the Fed’s Beige Book.

Prior to the durable goods report economists were looking for an increase of 1.0%, the actual report showed a drop of 1.0%. This news combined with an overbought situation triggered a break early in the session which took out yesterday’s low but held last week’s close. Following a delayed reaction to the Beige Book numbers, longs threw in the towel and stock indices broke. The sell-off in the September E-mini S&P 500 and September E-mini NASDAQ erased all of this week’s gains before settling slightly above Wednesday’s low.

Technically it looks as if breaking last week’s low will trigger an acceleration to the downside. Not only will it wipe out this week’s gains, but it will also trigger the possible start of a weekly closing price reversal.

The bearish durable goods report could be called a momentum buster as investors have gotten a little too comfortable with the pace of the current rally. This market is resilient however which means it is going to take more than a weak durable goods report to break it from current levels.

December Gold posted a daily closing price reversal triggered by both technical and fundamental factors. Technically, the market is finding support at a major 50% price level at $1159.40.

Fundamentally, a shift out of equities and the Euro could trigger a rally in gold as investors reallocate funds according to shifting risk sentiment and asset demands.

The weak U.S. economic data coupled with the sell-off in equities helped trigger reversal bottoms in both the September Treasury Bonds and Treasury Notes despite another government auction which increased available supply. Today’s technical pattern suggests the start of a 2 to 3 day rally.

The New Zealand Dollar fell for the second consecutive day following Monday’s bearish closing price reversal top formation. Wednesday’s decline was blamed on a drop in business confidence, but some traders attribute the weakness to position squaring ahead of tonight’s interest rate decision by the central bank.

Over the short-run speculators have been driving by the Kiwi in anticipation of a hike in the key borrowing rate. Traders are looking for a quarter-point hike to 3 percent. The weakness in the Australian inflation rate is not expected to have an affect on the Reserve Bank of New Zealand’s decision. Recent economic data suggests that worries about inflation getting out of control are strong enough to warrant a rate hike at this time.

Overnight Australia reported a lower than expected rise in its Consumer Price Index. This is a strong indication that the Reserve Bank of Australia is going to refrain from hiking its benchmark interest rate at its next meeting on August 3rd. Traders sold the Aussie on the news. Weaker U.S. equity markets helped maintain the weaker tone in this market.

The U.S. Dollar strengthened following the release of a poor durable goods report. Economists were looking for a 1.0% increase; the actual change was reported as -1.0%. Investors did an about face following the release of this data, buying the Dollar and selling higher risk currencies. Recently bearish news regarding the economy had been driving down the Dollar. Today’s reaction indicates that investors may becoming concerned that a weak U.S. economy will slow the global expansion. The drop in equity markets also contributed to the strength in the Dollar. After the bearish report and the initial reaction, the Dollar settled into a range against most major currencies.

This afternoon’s release of the Fed’s Beige Book had a limited affect on the Dollar. The consensus is the report paints a weak picture for the economy. The market reacted as if the report was a non-event. The reason for the flat reaction may have been that this news had already been factored into the markets since economic reports have been weak and Fed Chairman Bernanke stated last week that weak employment and slow GDP growth will continue to plague the economy.

The tone in the market appeared to be pro-Dollar today which could set up for a rally late in the week once the currency pairs breakout of their trading ranges.

Technically the Euro is still struggling with the psychological 1.30 price level. It seems that a close over this level may be the only way to trigger an acceleration to the upside.

The British Pound closed higher but backed off after testing a major 50% price level at 1.5635. The driving force behind Wednesday’s strength was comments from Bank of England Governor Mervyn King.

King said he thought the 2nd quarter surprise gain in the GDP was “encouraging” but expects new taxes to keep inflation under control. This would mean the BoE would not have to aggressively raise rates to keep a lid on inflation. King also said the central bank policymakers face a “difficult” challenge as it seeks to balance the risks for the economy. This comment was very close to Bernanke’s assessment that the U.S. economy faces uncertainty.

King left open the possibility of more stimuli by stating that their remains “room” to move in either direction and pledged to take the “appropriate” steps going forward in order to encourage a sustainable recovery.

In taking into consideration the state of the economy and King’s comments, one can conclude that the BoE is likely to stay the course and leave interest rates at historically low levels. This means that the recent rally in the GDP USD was most likely triggered by a weak U.S. economy rather than speculation that U.K. interest rates would soon rise. Furthermore, King has to be cautious at this time because a combination of a rate hike, new taxes and cost cutting may be too much for the economy to handle at this time. These would be the key reasons to trigger a decline in British Pound from its current level.

As we approach the end of the week, traders should be more aware of the action in the U.S. equity markets. Today’s action wiped out the gains for the week which could be an indication that sentiment is shifting away from higher risk assets. This could pressure the Euro and the commodity-linked currencies while supporting the Japanese Yen. The strength in the Dollar could begin tonight if Asian indices decide to follow the U.S. equity markets lower.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stocks Tumble as Weak Economic Data Fuels Excuse to Sell

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 28 Jul 2010 16:15:00 GMT

U.S. equity markets are trading lower at the mid-session fueled by an unexpected drop in durable goods. Prior to the report economists were looking for an increase of 1.0%, the actual report showed a drop of 1.0%. This news combined with an overbought situation triggered a break early in the session which took out yesterday’s low but held last week’s close.

Technically it looks as if breaking last week’s low will trigger an acceleration to the downside. Not only will it wipe out this week’s gains, but it will also trigger the possible start of a weekly closing price reversal.

The bearish durable goods report could be called a momentum buster as investors have gotten a little too comfortable with the pace of the current rally. This market is resilient however which means it is going to take more than a weak durable goods report to break it from current levels. Later this afternoon the Fed reports its Beige Book. Investors expect this report to confirm what Fed Chairman Bernanke said last week before a Senate committee. Bernanke is looking for unemployment to remain high and U.S. growth slow. The latter prediction will be assessed on Friday when the U.S. is due to report 2nd quarter GDP. A weaker than expected GDP report could trigger a sharp sell-off.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Bearish Durable Goods Report Pressuring Stocks

jhyerczyk@yahoo.com (James A. Hyerczyk) — Wed, 28 Jul 2010 11:15:00 GMT

U.S. stocks are trading weaker ahead of the opening. The market started to weaken on Tuesday following a drop in consumer confidence. This report seemed to carry more weight than a string of better earnings reports. Equity futures actually reached their highs shortly before the opening and never really got on track, forming a top even before the consumer confidence data was released.

Last night’s high in the September E-mini S&P 500 was at 1115.75 and occurred close to the German stock market opening leading me to believe that Europe may behind this morning’s weakness.

This morning’s U.S. Durable Goods Report was disappointing. The consensus was looking for an increase at 1.0%. The report actually showed a loss of 1.0%. Stocks sold off following the news. This bearish report is likely to set a negative tone for the day.

Later this afternoon the Fed releases the Beige Book, but the bad news is already out in the form of durable goods. The bearishness of this report makes Friday’s GDP Report all the more important. It is likely that traders will lighten up positions ahead of Friday’s number, leading to the possibility of a sharp sell-off into this number.

Technically, major cycle watchers are looking for a top this week and the start of potential hard down move. The key number to watch is 1100.50 in the S&P 500 which was last week’s close. A break through this number will turn the week lower and erase all of its prior gains. This will most likely cast a negative pall on the market.

U.S. Treasury futures contracts have reversed a lower opening and are now trading higher. The weak durable goods report has driven up demand for safer government assets. Currently the September Treasury Bonds are still in an uptrend despite the five day set-back. This trend will remain intact as long as the swing bottom holds at 125’07.

The upside momentum in the Treasuries may be limited today because of the increase in supply this week. On Tuesday the Treasury’s 2-Year Note auction yielding a record low. Demand was down since investors had the option of seeking higher yields in the stock market. If stocks should begin to weaken significantly, then look for demand for government assets to increase leading to a strong rally in T-Bonds and 10-Year Notes.

The U.S. Dollar is picking up strength this morning as traders shed risky assets. Investors are lightening up positions because of the weaker durable goods data, but the actually selling pressure may have started last night following a disappointing Australian Consumer Price Index number. The Aussie CPI rose less than economists had expected, curtailing gains and leading to the possibility the Reserve Central Bank will refrain from hiking interest rates for the third consecutive month.

Overall, the weak durable goods report sets a bearish tone in the stock market ahead of the opening. This is likely to lead to a profit-taking break. Investors are taking a defensive position this morning. The shedding of risky assets is likely to benefit the Dollar and Treasury markets as traders seek safety in lower yielding assets.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stock Markets Wavering; Technical Reversal Top a Possibility

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 27 Jul 2010 16:15:00 GMT

U.S. stocks are trading weaker at the mid-session after investors decided that a drop in consumer confidence carried more weight than a string of better earnings reports. Equity futures actually reached their highs shortly before the opening and never really got on track, forming a top even before the consumer confidence data was released.

Technically this potential topping formation is taking place at a time when cycle watchers are looking for a major top. A closing price reversal formation will be the best sign that a top has been reached. This pattern generally leads to a 50% correction of the last major rally and/or a 2 to 3 day break.

Although stocks are showing a potential top, there is still no sign in the Treasury markets that a major break is imminent. The Treasury market is most likely under pressure today because of the increase in supply triggered by the 2-Year Note auction. This auction went off at record low yields, garnering very little demand. A substantial break late in the session in the equity markets will likely lead to a flight-to-safety rally in the Treasurys. This will force traders to take the government debt regardless of the yield.

After piercing a minor .618 retracement level this morning, selling pressure hit the Euro after U.S. Consumer Confidence fell more than analysts had estimated. The report pressured equities and drove down demand for higher risk assets.

Today’s action is significant because it shows that investors have set aside worries about the European bank stress tests and are now turning their focus toward economic reports. Traders seemed reluctant to go long this morning after the U.S. reported a slight gain in home prices and amid improved corporate earnings. This represented a shift in sentiment as earlier in the month investors chased the Euro on both good and bad news for the Dollar.

The housing report in particular was interesting because it gave hope that the housing market may be improving although at a slow pace. Although reports have been confusing to investors lately, today’s break looks as if buyers just gave up on the long side of the Euro or they are making up excuses to take profits. Today’s break also demonstrates the strong correlation between the Euro and U.S. equity markets at this time.

Technically the Euro is in a position to form a daily closing price reversal top. This could lead to the start of a 2 to 3 week break if confirmed.

The break in the U.S. equity markets is also leading to profit-taking in the higher risk currencies. All three major asset-linked currencies – Australian Dollar, New Zealand Dollar and Canadian Dollar – are in positions to post closing price reversal tops. If sentiment is turning bearish on risk then look for the start of a correction in these three markets.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

European Strength Driving U.S. Futures Markets Higher

jhyerczyk@yahoo.com (James A. Hyerczyk) — Tue, 27 Jul 2010 11:15:00 GMT

Investor sentiment is up this morning, driving U.S. stock index futures higher in the wake of strong earnings results from European banking giants UBS and Deutsche Bank. Investors are also buying in anticipation of strong earnings results from Aetna, Inc., Anadarko Petroleum Corp., DuPont and Lockheed although banking stocks are expected to carry the market today.

Today traders will have a chance to react to two U.S. economic reports: the Case-Shiller 20 City Index and Consumer Confidence. The Case-Shiller housing report for May is expected to rise to 4.0% from 3.8%. This will be the biggest rise in the index since September 2006. Consumer Confidence is expected to come in at 51 which is down from 52.9. A greater than expected drop will fuel concerns about a double-dip recession.

Treasury Bonds and Notes are trading lower in anticipation of better housing numbers. A strong number will pressure the Treasurys as investors cut demand for the safety of government debt. Investors are facing a huge supply situation at this time. Today the U.S. Treasury will auction $38 billion in 2 Year Notes. Look for low demand at this auction as the expected record low yield is expected to keep investors on the sidelines. Furthermore, there is just too much demand for higher yielding equities at this time to warrant strong demand for the lower-yielding T-Notes.

Demand for risky assets is helping to drive up September Crude Oil this morning. Upside momentum is building which could drive this market through the major swing top from June at 80.82. A key 50% retracement level at 80.88 will be an important barrier this market will need to overcome to trigger an acceleration to the upside. Today the American Petroleum Institute oil inventory report is expected to show a decline of 2.3 million barrels. This news could fuel an intraday upside breakout.

Surprisingly, August Gold is trading higher. Gold has been steadily falling since the Euro bottomed as traders have been shedding their hedges against a currency collapse. The rise in the stock indices has also been pressuring gold as both markets have been competing for investment dollars. August Gold is in a downtrend and may have to test a major 50% price at $1158.30 before reaching a value area on the charts.

The Dollar is trading weaker across the board except the Japanese Yen. Investors are feeling more confident about the global economic recovery and shedding safer currencies. Commodity-linked currencies are trading higher let by the Australian Dollar as traders buy ahead of tomorrow’s CPI report. A stronger than expected inflation figure is expected to solidify a rate hike by the Reserve Bank of Australia. Strong demand for equities is reigniting interest in the carry trader which is pressuring the Japanese Yen.

Monday Recap

The Dow finished sharply higher after moving positive for the year. Slow and steady was the move on Monday as stocks opened higher then slowly built on their gains throughout the day buoyed by the news that U.S. New Home Sales beat estimates and FedEx boosted its forecast

Early in the trading session, stocks got a boost as investors were able to set aside risk because of the acceptance of the European bank stress test results. Some traders were worried that given the weekend to digest last week’s stress test data, investors would reconsider their bullish tone set in motion on Friday. This was not the case, as investors held stocks steady to better overnight despite widespread criticism of the techniques used to assess the solvency of the European banking system.

Technically, the September E-mini Dow Jones futures contract turned the main trend up on the daily chart with a move through 10367. The chart indicates the market is in a position to test the .618 retracement level at 10516 and the June top at 10536 over the near-term. The September E-mini S&P 500 turned its trend up on the trade through 1099.25. This market is struggling at a 50% level at 1107.00. Holding above this level could launch an acceleration to the June top at 1129.50. Finally, the September E-mini NASDAQ is in an uptrend on the daily chart. Holding the 50% level at 1875.75 could help drive this market to the 61.8% retracement price at 1917.75.

Cycle watchers may have been disappointed by Monday’s strong finish since several technical timers had been looking for a reversal top. Monday’s action did not negate the outlook however as several key cycles are also set to converge later in the week. Continue to watch for higher-highs, but become cautious if an intraday reversal top develops.

While equity traders looked at yesterday’s New Home Sales Report as friendly, Treasury Bonds and Notes rallied on the news. A one-month bounce off of last month’s low was not enough to convince investors that interest rates would rise because of the news. In fact, the Treasurys are still suggesting the possibility of a double-dip recession because of the recent weak economic reports as well as Fed Chairman Bernanke’s bearish testimony.

Longer-term investors are pricing in the possibility of the first rate hike in years by the Fed in September 2011. This clearly shows the market still does not have strong confidence in the economy. This logic flies in the face of the stock market rally which is being driven by better than expected earnings and revenues. The question is what is the best indication of the state of the economy, the broad-based economic reports or the earnings outlooks.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

New Home Sales Helps Dow Move Positive for Year

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 26 Jul 2010 20:45:00 GMT

The Dow finished sharply higher after moving positive for the year. Slow and steady was the move on Monday as stocks opened higher then slowly built on their gains throughout the day buoyed by the news that U.S. New Home Sales beat estimates and FedEx boosted its forecast

Early in the trading session, stocks got a boost as investors were able to set aside risk because of the acceptance of the European bank stress test results. Some traders were worried that given the weekend to digest last week’s stress test data, investors would reconsider their bullish tone set in motion on Friday. This was not the case, as investors held stocks steady to better overnight despite widespread criticism of the techniques used to assess the solvency of the European banking system.

Technically, the September E-mini Dow Jones futures contract turned the main trend up on the daily chart with a move through 10367. The chart indicates the market is in a position to test the .618 retracement level at 10516 and the June top at 10536 over the near-term. The September E-mini S&P 500 turned its trend up on the trade through 1099.25. This market is struggling at a 50% level at 1107.00. Holding above this level could launch an acceleration to the June top at 1129.50. Finally, the September E-mini NASDAQ is in an uptrend on the daily chart. Holding the 50% level at 1875.75 could help drive this market to the 61.8% retracement price at 1917.75.

Cycle watchers may have been disappointed by today’s strong finish since several technical timers had been looking for a reversal top. Today’s action does not negate the outlook however as several key cycles are also set to converge later in the week. Continue to watch for higher-highs, but become cautious if an intraday reversal top develops.

While equity traders looked at today’s New Home Sales Report as friendly, Treasury Bonds and Notes rallied on the news. A one-month bounce off of last month’s low was not enough to convince investors that interest rates would rise because of the news. In fact, the Treasurys are still suggesting the possibility of a double-dip recession because of the recent weak economic reports as well as Fed Chairman Bernanke’s bearish testimony.

Longer-term investors are pricing in the possibility of the first rate hike in years by the Fed in September 2011. This clearly shows the market still does not have strong confidence in the economy. This logic flies in the face of the stock market rally which is being driven by better than expected earnings and revenues. The question is what is the best indication of the state of the economy, the broad-based economic reports or the earnings outlooks.

The Australian Dollar surged on Monday as rising equity markets drove up demand for higher yielding assets. Traders are also chasing the higher yield in Australia due to the weaker outlook for the U.S. economy.

Early Monday morning, the Aussie’s rally slowed a bit due to a disappointing Producer Price Index report. The PPI rose 1.0% compared with a forecast 1.5% rise. After a slight retreat from the early session high, the market regained its momentum to test .9000 in the U.S. session for the first time since the middle of May.

Although initially concerned with the modest gain in the PPI, traders quickly turned their focus on Wednesday’s Consumer Price Index. Traders are looking for this report to show an increase of 0.8%, keeping in line with the Reserve Bank of Australia’s overall target band of 2% to 3%. A report greater than the estimate could be the trigger which gives the RBA a reason to hike its benchmark rate once again at the next policymakers meeting on August 3.

The RBA has been on the sidelines since May, choosing to ignore the economy over the short-term because of the financial problems in Europe at the time. Now that is seems the European financial system is sound, the RBA will shift sentiment back to the economy. The Australian economy has been strong but traders will have to decide on Wednesday whether it has been strong enough to warrant another rate hike based on the inflation data. A spike in consumer prices will put inflation over the target band, setting the table for a 25 basis point hike to 4.75%.

Despite questions about how the European bank stress tests were conducted, investors seemed satisfied enough with the results early Monday morning to underpin the Euro while waiting for fresh news regarding the U.S. housing market.

Following the release of U.S. new home sales data which saw an increase in June by more than economists had forecast, the Euro rallied and is now pressing a minor .618 retracement level at 1.2998. This puts this pair in a position to challenge last week’s high at 1.3028.

Stocks extended their gains following the housing report, driving up demand for higher risk assets, helping the Euro maintain the upward momentum which helped drive the market higher late last week.

The British Pound finished higher but momentum slowed when the market neared a weekly swing top at 1.5523. A breakout over this level will turn the main trend up and set up a possible acceleration to a major 50% retracement level at 1.5635.

Fundamentally the Sterling is being driven higher by last week’s release of better than expected second quarter GDP. Last week’s news that the U.K. economy expanded by a strong 1.1 percent was a sign the economy was more stable than previously estimated. This news led some investors to believe that the Bank of England will have to seriously consider raising its benchmark interest rate sooner than expected.

As the Pound approaches a key retracement level at 1.5635, investors have to realize that the second quarter expansion took place before the government implemented its proposed deep spending cuts and tax hikes. The biggest fear amongst bullish traders is that the government’s proposed austerity measures will curtail the gains that the economy is currently showing.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Dow Turns Positive for Year; New Home Sales, FedEx Forecast Boost Stocks

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 26 Jul 2010 16:15:00 GMT

News that U.S. New Homes Sales beat estimates and FedEx boosted its forecast helped drive the Dow Jones Average up this morning, helping to erase all of its 2010 loss. Of the three major indices, the Dow Jones looks to be the strongest.

Technically, the September E-mini Dow Jones futures contract turned the main trend up on the daily chart with a move through 10367. The chart indicates the market is in a position to test the .618 retracement level at 10516 and the June top at 10536 over the near-term. The September E-mini S&P 500 turned its trend up on the trade through 1099.25. This market is struggling at a 50% level at 1107.00. Holding above this level could launch an acceleration to the June top at 1129.50. Finally, the September E-mini NASDAQ is in an uptrend on the daily chart. Holding the 50% level at 1875.75 could help drive this market to the 61.8% retracement price at 1917.75.

Cycle watchers are looking for a top this week which could lead to a tremendous sell-off by the end of the week. The move may start today especially since it looks as if the intra-day rally has stalled. The best sign of a top formation will be a closing price reversal top by the end of today.

Those looking for a top in equities should watch the Treasury markets for clues. Today the September T-Notes and T-Bonds weakened when the better than expected housing data was released. A reversal down in equities is likely to trigger a short-covering in the Treasurys late in the session.

Despite questions about how the European bank stress tests were conducted, investors seemed satisfied enough with the results early this morning to underpin the Euro while waiting for fresh news regarding the U.S. housing market.

Following the release of U.S. new home sales data which saw an increase in June by more than economists had forecast, the Euro rallied and is now pressing a minor .618 retracement level at 1.2998. This puts this pair in a position to challenge last week’s high at 1.3028.

Stocks extended their gains following the housing report, driving up demand for higher risk assets, helping the Euro maintain the upward momentum which helped drive the market higher late last week.

The British Pound is higher this morning but momentum slowed when the market neared a weekly swing top at 1.5523. A breakout over this level will turn the main trend up and set up a possible acceleration to a major 50% retracement level at 1.5635.

Fundamentally the Sterling is being driven higher by last week’s release of better than expected second quarter GDP. Last week’s news that the U.K. economy expanded by a strong 1.1 percent was a sign the economy was more stable than previously estimated. This news led some investors to believe that the Bank of England will have to seriously consider raising its benchmark interest rate sooner than expected.

As the Pound approaches a key retracement level at 1.5635, investors have to realize that the second quarter expansion took place before the government implemented its proposed deep spending cuts and tax hikes. The biggest fear amongst bullish traders is that the government’s proposed austerity measures will curtail the gains that the economy is currently showing.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Stock Traders still Assessing Stress Test Data, Earnings Main Market Driver

jhyerczyk@yahoo.com (James A. Hyerczyk) — Mon, 26 Jul 2010 11:15:00 GMT

Now that the distraction of the European bank stress tests is out of the way, traders turned their focus on second-quarter earnings. Overnight stocks wavered with no clear trend. Some traders expect momentum to take over and drive this market higher from the start. Technical cycle watchers are calling for a reversal down late in the session which could set up a sharply lower break by the end of the week. All of this is adding up to the possibility of a tumultuous week.

Traders are still questioning the credibility and rigor of the bank stress tests which may mean that new issues will be discovered as analysts pour over the data. In addition, close to two thirds of all S&P companies will have reported by the end of this week, leading to the strong possibility of earnings surprises which could move this market in both directions.

One key indicator to continue to monitor will be the Treasury market. This morning the Treasuries are holding steady to slightly better, indicating that there is a little demand for lower yielding assets. With 10-year yield hovering near 3.00%, the desire for safety is still in the air. A break through 121’14 will turn the main trend to down on the daily chart and give this market a slightly bearish tone, but until that happens, the chart pattern is still suggesting a higher-high, higher-low pattern.

The U.S. Dollar is also under pressure this morning. The Euro is continuing its rally after the stress tests failed to reveal any serious surprises. The British Pound is soaring, backed by positive economic data and good news regarding its stress tests. Finally, demand for higher risk is helping to drive commodity-linked currencies higher.

Last week’s testimony by Fed Chairman Bernanke, calling for a weaker economy coupled with better than expected economic data from Europe is helping to keep pressure on the Dollar. Traders are starting to believe that interest rates will remain low in the U.S., while the possibility of a hike in rates in Europe and the Pacific Rim remains strong.

This morning there is only one economic report. At 10 a.m. Eastern Time, the U.S. will report New Home Sales. The consensus is looking for an increase of 6.7 percent from a month earlier. Although this seasonally adjusted figure is expected to be higher than the slow pace from May, the market remains weak now that potential buyers can no longer get federal tax credits.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved

Wall Street Turns Bullish after Stress Test Calms Traders

jhyerczyk@yahoo.com (James A. Hyerczyk) — Fri, 23 Jul 2010 20:45:00 GMT

U.S. equity markets soared to the upside late in the trading session after treading water at the mid-session. The markets traded sideways after the release of the European bank stress tests, giving traders time to assess the results. The news that the majority of European banks passed the stress tests came as a relief to traders who shifted their interest back to earnings report and the global economy recovery.

The lack of any fresh economic news was another factor affecting the trade today. Earnings reports were good this morning, but with the focus on European stress tests later in the session, gains were limited. Once traders saw that the tests revealed no major flaws in the banking system, demand for risky assets rose along with stock prices. For the week, all three major indices posted strong gains during sometime volatile trading sessions.

Earlier in the week, the markets were crushed by commentary from Fed Chairman Bernanke who talked about the weak economy and the need for new stimuli. The markets turned around early Thursday morning when the Euro Zone reported robust gains in the industrial sector. The strong close has the markets in a position to break out to the upside, but gains could be limited late in the week as many cycle watchers are predicting the start of a major break.

Treasury markets traded lower after failing to mount a comeback when stocks weakened near the mid-session. T-Bond and T-Note investors took profits after strong rallies earlier in the week. Although interest rates are expected to remain under pressure over the near-term, the shifting of assets out of fixed income instruments and into equities should pressure the Treasuries. Overall, however, traders should look for a correction rather than a change in the trend. This is not likely to occur until there is solid evidence the economy is turning back up.

August Gold closed unchanged for the week. Traders are confused about the fundamentals at this time. The rise in stocks should pressure gold as both assets classes compete for the same assets. However, gold may rally if the Dollar gets trashed. Traders have to make a decision as to which event to follow. A decision may be made once gold tests a major 50% level at $1158.30.

The U.S Dollar Index had a roller-coaster ride this week although it managed to finish only slightly lower. Based on the November 2009 to June 2010 trading range of 75.03 to 89.22, this market is now testing a major 50% level at 82.12.

Over the past two weeks, the pace of the decline has slowed as the market approached the 50% retracement level, but following this week’s inside trading range, may be set up for an acceleration to the downside. A break through 82.12 is likely to trigger a sharp break into the next retracement level at 80.45.

Traders should turn their attention to this index this week because of the possibility of stronger than average volatility and the potential for a support base to form between the 50% and 61.8% retracement levels at 82.12 to 80.45.

The Weekly Euro had a volatile, two-directional trade this week, ping-ponging between a 50% support level at 1.2783 and a 61.8% resistance level at 1.2998. Technically, the weekly chart formed a closing price reversal top, but will have to trade through 1.2732 to confirm it. A confirmation of this pattern is likely to trigger a 2 to 3 week correction back to 1.2452 to 1.2316.

A failure to confirm the reversal top and a close over 1.2998 will be a bullish signal. Look for an acceleration to the upside if this occurs since the chart indicates no major resistance on the weekly chart until 1.3510.

On Friday, the Euro was up in early session trading in a continuation of Thursday’s strong rally before jitters about today’s stress tests triggered a profit-taking correction. From an early session high at 1.2965, the Euro broke to 1.2793 shortly after the New York opening.

The September Euro spiked to 1.2910 immediately after stress test results began being released, but sold off quickly as traders were disappointed with the results. Although only a small number of European banks passed their stress tests, investors remained skeptical about the methodology used by the regulators. Many viewed the guidelines used as too easy on sovereign debt.

As expected, Germany’s HRE, Greek’s Atebank and Spain’s Banca Civica failed their tests, but most banks passed even in hot spots such as Greece and Spain.

The biggest concern for investors was that stress tests excluded the possibility of sovereign debt default. Sovereign debt held in portfolios was distinguished from sovereign debt held to maturity. Debt held for trading is expected to be marked to market; debt held to maturity is not.

The problem with this separation into two different types of debt means that it is possible that losses by banks will be underestimated. This could hurt the financial health of European Banks and undermine the credibility of the banking system.

The concerns being raised by investors put pressure on the Euro at the mid-session, but a late session rally in U.S. equity markets triggered a short-covering rally in the Euro, pushing it higher for the day. While the news about the bank stress tests is unsettling, risk takers decided that nothing out of the ordinary was revealed so traders turned their attention to higher risk assets like U.S. stocks in what can best be described as a relief rally.

The British Pound rallied sharply higher on Friday versus the U.S. Dollar and the Euro. Friday’s rally was ignited by the news that the U.K. economy grew almost twice as much as economists forecast in the second quarter in the fastest expansion for four years. The strongest gains were seen in the services, manufacturing and construction sectors.

The bullish economic news out of the U.K. was damaging to the U.S. Dollar because it was solid proof that the economy was recovering at a time when the Fed was forecasting a weaker GDP for the U.S. Friday’s report may be the evidence the Bank of England needs to begin hiking its historically low benchmark interest rate. In the meantime, the Fed is pondering applying more stimuli as well as renewing its quantitative easing program. Treasury market traders are already pricing in a rate hike for September 2011, this is up from an earlier forecast of Spring 2011.

The improving economy and the possibility of a sooner-than-expected rate hike make the GBP USD a more attractive investment at this time. Technically, the Pound/Dollar had an inside week which indicates impending volatility. The strong close puts this market in a position to take out the April swing top at 1.5523. A breakout above this level may run into selling pressure inside of a major retracement zone at 1.5635 to 1.5967.

Although the initial reaction to the stress tests was bearish for the Euro, traders quickly realized that the news was already in the market. In my opinion, European Central Bank President Trichet’s comment earlier in the month that banks would need to raise capital and a rumor last week that eleven banks would fail the test was spot on. Today’s report revealed that seven institutions didn’t have enough capital and may need to raise more than $4.5 billion.

Analysts around the globe are saying that the stress tests weren’t stringent enough and that the release of the results failed to alleviate market concerns about the banking system’s vulnerability to sovereign-default risk. Nonetheless, investors spoke today by trashing the Dollar and rallying stocks, this could be an indication that they have put the tests behind them and are turning their focus on the global economic recovery. This means that economic reports are likely to carry more weight in the weeks ahead.

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. www.patternpricetime.com © Copyright 2008-2010. All rights reserved