European Rate Move Reverberates Throughout Markets
The decision by the European Central Bank (ECB) to leave interest rates
unchanged is rippling through financial markets, effecting currencies, bonds,
and metals.
The
Euro FX
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European rates makes holding Euro-denominated assets relatively less
attractive then assets denominated in other currencies. Both are on the Implosion-5 List.
Going the other way and from the Momentum-5
List, September dollar index futures
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110.98.
Relatively higher US rates are boosting T-bond futures.
Bond analyst Tony Crescenzi
submitted to the TradersWire that "there is talk in the bond market of
expected disappointment in Cisco’s numbers and this is hurting the Nasdaq and
helping the bond market." September T-bond futures
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to 99 13/32 and trading near a contract high. Interest rate futures also got a boost from an apparent flight-to-safety scramble out of techs and into securer treasuries.
Gold is denominated in dollars and a stronger dollar is making gold relatively
less attractive. Gold is also on the Implosion-5 List
but signaled it could make a larger-than-expected move by registering on the 6/100 Low Volatility
List. Gold is down 3.5 to 273.0.
A change in strategy from Motorola indicating the firm
would scale down their wireless handset production goals sent the tech sector
into a tail spin before Thursday’s open. Nasdaq 100 futures
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down their trading limit-curb of 92.00 points and then gapped down to a
132-point deficit. Traders scooped up stocks and futures contracts at that level
as the "dirty dozen" most heavily weighted stocks on the Nasdaq
100 spun around. Sun Micro
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and Nextel
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rally back to near-break levels.
After steep declines, I look for a "V" bottom formation for a rebound
from the "unsustainable" down momentum witnessed on the open.
Unsustainable downward momentum I define as a decline so swift that, if it were
sustained, it would wipe out the entire value of a particular instrument within
a matter of hours. This morning the Nasdaq 100 futures
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points in the first 11 minutes. At this pace, 12 points a minute, the entire
value of the NDU0 from 3380 would have been wiped out in 281 minutes, or in just
under five hours. This is unsustainable and I look for a "V" signal
to enter. As the chart shows, there are two possible entry points to enter on,
as well as a pullback from an intraday swing high.