Embattled Euro
You think the specter of energy inflation is bad here in
the states, consider the European situation. Expensive oil is even more
expensive for those living in Euroland because oil is denominated in dollars.
And Continentals are getting whacked with the double whammy of higher energy
costs, exacerbated by the single-currency euro that plunged Wednesday to yet
another new all-time low. Even though the oil prices have come off their $37 a
barrel high, energy costs are remaining high with a tumbling euro.
As I’ve been mentioning in this space and in “Landry’s
Futures Trading Outlook” (which I wrote while he was traveling to Vegas), recent
comments by the head of the European Central Bank (ECB) divulged that the
Fed-like institution would not intervene in world currency markets to prop up
the value of the fledgling euro. This set the stage for further downside, which
further complicates the situation for the battered currency.Â
Burdened with escalating energy costs that will impair
governments’ capacity to spark much-needed economic growth, the ECB will be
significantly less likely to raise interest rates and close the differential
with US rates (4.5% vs. 6.5% for short term rates), a factor that further
undermines the Euro. The ECB meets tomorrow on interest rate policy. Capping the
downcurrents were rumors swirling that the above-mentioned ECB head, Wim
Dusenberg, could resign. Traders abhor uncertainty.Â
Today’s activity lead to one of the biggest drops ever
for the euro FX
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new low of .83510. Swiss francs
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dollar index futures
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have been signaling their directional bias on the Momentum-5
and Implosion-5
lists, respectively.
Dollar index futures surged–and the euro FX dropped–as blue chips
turned around from seven-month lows, rallying nearly tick-for-tick with the Dow
as it recovered from a 435-point deficit. Bear in mind that the negative showing
in stock index futures had been glaringly hinted at on the
Implosion-5 List,
where both the S&P
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Dow futures
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All three stock index futures tagged or traded in positive territory at some
point Wednesday. Dow futures closed down 97.0 at 1043.0, S&Ps closed down
7.00 at 1352.80, and Nasdaq 100 futures fell 15.00 at 3155.00.
T-bonds
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PowerRating), from the Momentum-5
List, rallied up to resistance at recent highs as traders scrambled for the
perceived safety of bonds on the IBM revenue-slowdown fright. The contract,
however, turned around from a 27-tick gain to close 2/32 lower at 100 1/3. The
possibility of this scenario unfolding was also highlighted in last night’s “Futures
Outlook:”
“Look for T-bonds to
continue to resistance in the 100 21/32 area on more safe-haven buying in the
event of any negative or neutral news. It is from that area that the December
contract (USZ0)
is more likely to reverse (the contract is currently showing a Turtle
Soup Plus One Sell). Expensive oil, poor corporate earnings, Middle East
violence, and stock option expiration are all making the perceived stability of
bonds attractive.“
As mentioned, the rally in energies exacerbated the
decline in energies. Crude oil
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closed .49 higher at 33.48 after the weekly American Petroleum Institute
reported that stockpiles took an unexpected dip and are now standing at 24-year
lows. All of the energy contracts tallied on the Pullback From Highs
List. November heating oil
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with crude, closing up .0057 and .0213, respectively.