Middle Easterners Express Confidence
A rally in US stocks that has taken the S&P 500 index up 16.5% off
its September lows and the steady prosecution of military strikes in
Afghanistan brought a show of confidence from a wealthy market quadrant,
Middle East banks. Confidence was most visibly expressed in large sales of Swiss francs
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which fell sharply and have continued lower after plunging in overnight trade.
The Swiss franc had jolted to nearly a contract high as investors from
around the world fled the uncertainty of the US, the dollar, and other
global assets, for the perceived safety of Swiss francs.
The Swiss have long been considered a “safe haven” due to their
reputation as trustworthy bankers, due to their reputed neutrality, and due
to an “every man” civil militia and mountainous geographic
location that presents an air of impenetrability.
A New 10-Day Low
gave you direction and a Multiple Days Low
Volatility reading implied a larger-than-normal move, a somewhat rare and
nice combination of signals (direction and a higher likelihood of a big
move) in the Swiss franc. The New 10-Day Low made this contract eligible for an
Off The Blocks
short entry, which the contract made good on after trading below the
low of the opening five-minute bar. Notice that that today’s lows came
at the confluence of the 38.2% and 61.8% (Fibonacci) retracements of the
July 5 and September 4 lows (each to the Sept. 21 highs),
respectively.
An
identical 10-day low and volatility situation played out in December British pounds
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Currency traders are also focusing more on the prospects of comparative
national economic growth than on comparative interest rates. The European
Central Bank left rates unchanged at 3.75% and comments from its President,
Wim Duisenberg, today implying the ECB will not cut rates. Duisenberg said,
“If we have room for maneuvering (to cut rates more), it’s very
little.”
The sentiment from Europe’s top banker reduces the likelihood of an
interest rate cut later this month and reinforces the view the ECB is
focused on controlling inflation rather than stimulating the economy. With
the equivalent US short-term rate 125 basis points (1.25%) lower and
the Fed focused on growth, the US economy and stocks should rally more
relative to Europe.
T-bonds
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after leaving an island formation two days ago when they lapped down from a
three-day consolidation at contract highs. Bonds had been held higher due to
liquidity problems in the repurchase market and also due to flight-to-safety
buying.
Enhancing the move down in bonds, stock index futures rallied to close the gaps left from the
Sept. 11 attacks, as traders pulled money out of bonds and are putting it
to work in stocks. Bonds were contained on the opening by intraday triple
tops and provided an intraday Pullback From Lows setup, as well as a Slim Jim
short formation before the descent was also stopped at the 38.2% retracement of
its most recent (Sept. 20) daily swing.
Dow futures
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registering a New 10-Day High and
made good on an Off The Blocks
long entry to close up 160.0 at 9415.0.
S&P futures
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could continue higher by closing above the 9/11 gap yesterday, a feature
pointed out in last night’s Futures Market Recap.
Also unwinding fear in the flight-to-safety department, safe-haven metals (gold
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and silver
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approval of the prosecution of military action in Afghanistan.
After a week of selling, Dec lean hogs
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oversold. Their
Turtle Soup Plus One Buy signal provided an indication to consider
reflexive, short-term (intraday) buys against the four-month lows, although an
alternative trigger to the Turtle Soup pattern would have been necessary, as the previous 20-day low was
too far away to hit.
Leading the Momentum-5
List, feeder cattle
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long entry. This market is just shy of the 50% retracement of its
September-October plunge, so cover or consider reversing if long