Bullish Pressure Finally Forces Short Stock Traders to Give Up
International Trading
THE TECHNIQUE OF GIVING A GOOD MASSAGE
14 years ago
Saturday, September 25, 2010
, Posted by Usman Ali Minhas at 10:49 AM
The December E-mini S&P continued its rally this week, bucking the seasonal tendency and pretty much assuring that September will be an up month. This index was choppy this week, but eventually bullish investors were paid off when the market rallied on Friday.
Tuesday’s Fed statement, hinting at more asset buying, should have been enough to launch a rally, but investors were nervous about buying strength, triggering violent swings. Eventually the bulls won the battle as buyers defended the low for the week twice before finally pressuring the shorts enough to give up their positions.
The charts are now indicating that 1155.00 to 1160.75 is the next upside target.
December Gold traded through $1300.00 for the first time in history without much fanfare. There is really not much to talk about until Gold does something to catch my eye. Currently the rally looks pretty normal. I’m looking for either a spike up to indicate exhaustion or a dramatic closing price reversal top. The swing chart indicates that $1318.10 is the next upside target on October 4. A move to this price on this date will mean the market is balanced. There is nothing exciting about that.
The U.S. Dollar finished sharply lower this week after the Fed strongly hinted that it would provide more aid to prevent the economy from derailing. Foreign currency investors reacted as if the Fed had given them the green light to sell the Dollar, delivering a crushing blow to the greenback against all major currencies.
Many investors now feel based on the tone of the Federal Open Market Committee’s statement that it was getting ready to rev up the Treasury printing press for another round of quantitative easing in November.
The December Japanese Yen finished the week higher after ending last week in a position to breakout to the downside. The rally in the Yen triggered a retracement of the entire “intervention break” from over a week ago. The inability to follow-through to the downside may have served as further proof that interventions are hard to pull-off without the help of other central banks.
For several weeks prior to the intervention I had warned that Japan’s first intervention in over 5 years would likely fail if the Bank of Japan was forced to go it alone. With almost every major central bank facing economic problems of their own, it was highly unlikely that they would buy Dollars and sell Yen just to help Japan’s economy improve. In fact, after the Fed hinted hard at additional quantitative easing, some accused it of deliberately weakening the Dollar, thus reducing the impact of the BoJ’s intervention.
Late in the week, the Japanese Yen broke sharply lower overnight on speculation that the BoJ had intervened again. This proved to be a rumor and the Yen resumed the rally it had begun earlier in the week.
Without the cooperation of other central banks and facing a weakening U.S. economy, it is likely the Japanese Yen will continue to rally next week with very little chance Japanese officials can stop it from appreciating further
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