Double top in the stock market?
We are nearing a very critical level in the stock index futures.
Previous indicators turned to the upside around the 7300 area. With a target of 7750-7780, today we reached 7739 as the high before dropping about 40 points. At this point we could see a bit more correction back down to 7600, with more support at 7540, and then just below the 7500 area. In the short term, todays high could mark a double top. The Dec. S&P topped out at 955.50 on the previous rally, today we topped out at 954.20. Those are important numbers to watch, but in the short term, I believe we are going to get a pullback over the next few days. Dec S&P up 16.50 at 949.1.
The outlook for the bond market remains positive right now. Last weeks economic data such as the PPI, and retail sales were both under market expectations which is fundamentally positive for the market. Technically the market broke up to new highs last week once it exceeded the 119 level for the Dec. futures contract. The fed did not act to raise interest rates last week at the FOMC meeting. When you combine all of these factors together, look for higher bond prices,
although in the short term we could see a pullback if the CPI later on this week is higher than expected. Overall, we are heading toward the 121 level for the Dec. bond contract. Bonds up 9/32 at
118 25/32.
It appears that we have seen a significant shift in the dollar. With the D Mark and the Swiss franc both turning to the downside today. These markets have rallied over the last few weeks, they appear to be running out of upside momentum. Given the weakness today, we could
be due for some significant selling in the European currencies. The
J-Yen remains weak as the economy in Japan and the concern about the
financial markets of Asia continue to drag on the J-Yen market.
It was disappointing, given the gains we saw last night in Tokyo, more
than 8% for their stock market, that it did not translate into more gains in the Yen. If this market cannot rally with bullish news, then it is most likely going to continue moving lower once we do get some bearish news. Yen down 14 pts at 79.87.
to be continued....... |
