Wednesday, September 7, 2011

Morning Market RoundUp

Yesterday, there were two important stories.  First, the ISM services printed better than expected.  This provided much needed enthusiasm.  Secondly, the Swiss National Bank established a hard franc/euro exchange rate, essentially lowering the value of their currency to increase the competitiveness of their respective businesses. 

Notice the incredibly large spike in the dollar index yesterday on very large volume.  The overall move was 1.65% -- a large move for a currency.  The dollar is still trading in a range between 20.9 and 21.9, so the overall effect doesn't indicate a major change in the market's tenor -- yet.  However, this is the kind of move that can fundamentally change markets, so keep your eyes open.  But for that to happen, the technicals would have to change, and considering the EMA picture is still bearish, we'll have to wait and see.

Conversely, the euro is at the bottom of a trading range, just barely hanging on to technical support.  But yesterdays move also sent the euro below the 200 day EMA on high volume, adding weight to the events.  But, the EMA picture is still very jumbled, with the shorter EMAs in a very tight range, so, like the dollar, we'll have to wait and see what happens next.  Just for kicks, I'd seriously think about shorting around 138.5 if confirmed on volume and further deterioration in the fundamentals.  

The ISM reading added some strength to the market.  Notice the next day-long rally and the fact the market ended on a high point on increasing volume.  

But one days action does not a bull market make, as the daily chart is still negative.  The EMAs are bullishly aligned and no rally in the last few months have been able to maintain momentum.  And while the intra-day price action was good, the lack of volume is concerning, as it indicates that traders are less than enthused about the current market situation.  I'm still expecting a retest of the 112 area at this point.  

Regarding the Treasury Market, Tim Knight over at Slope of Hope notes that the 10 year's yield is now below the levels seen in the financial crisis.