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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Daily Futures Markets Commentary

Stock-Markets / Financial Markets 2009 Jul 14, 2009 - 07:02 AM GMT

By: BrewerFuturesGroup

Stock-Markets

September British Pound - September British Pounds are called lower this morning based on the weak overnight trade. Trading can be described as defensive as investors are becoming more risk averse during this time period when U.K. stocks are weakening and the economic picture remains bleak. The sell-off overnight highlights the fact that traders are becoming more sensitive to the weakening equity markets and more attracted to safe-haven currencies like the Yen and the U.S. Dollar.


The weakness in this market began in late June following a report by the Organization for Economic Cooperation & Development said U.K. Gross Domestic Product (GDP) would most likely contract 4.3% this year. Selling pressure continued after the International Monetary Fund warned that the U.K. is not in a position to budge for another stimulus plan. Finally, it was reported by the Sunday Times that Lloyds would take additional write downs. This is leading to speculation that the banking industry may still be experiencing problems which could send the U.K. economy into a double-dip recession. Traders are expressing no confidence in an economic revival and the general feeling is the worst of the economic problems hasn’t passed.

Technically, the main trend is down. The next down side target is a retracement zone at 1.5908 to 1.5711. This market may find short-term support in this zone with a technical bounce to the upside likely before new sellers step in to eventually push this market to the June 8 bottom at 1.5795.

September Treasury Bonds

September Treasury Bonds are trading higher overnight. Global equity markets are down overnight leading investors to take protective long positions in the Treasury markets. Traders are basically taking risk off the table and focusing on protecting capital which means shifting out of risky assets and into safer cash or Treasury markets. The Fed is due to make new purchases this week which should help support prices. Last week’s Treasury auction which led to another increase in supply was well received and appears to have had no effect on this market.

Although this market is expected to move higher as investors pull money out of equities, gains may be limited because of talk out of Japan calling for the country to begin to limit its purchases of Dollar-denominated Treasuries. The opposition party in Japan is calling for the nation to consider moving $1 trillion of foreign reserves away from the U.S. Dollar. This is the same line of thought that has been introduced by Brazil, Russia, India and China. The reason behind this movement is to prevent exposure to volatility in the U.S. Dollar.

Technically, the main trend is up. Regaining a key 50% price could help accelerate a move to the upside with 123’09 the next upside target. The trend will remain up unless 117’11 is violated.

September Crude Oil

Look for a lower opening in September Crude Oil. The stronger U.S. Dollar and the weaker Euro are having a direct effect on the energy markets overnight. Weaker equity markets in Asia and the U.S. are leading to speculation that these markets are expecting a double-dip recession which will shunt demand for fuel and increase oil inventories. Weak demand and generally bearish sentiment most likely led hedge funds to decrease long positions as reported in the Commodity Futures Trading Commission Commitment of Traders Report.

Technically, the main trend is down. Based on the major range of 44.28 to 74.66, look for the break to continue to the retracement zone at 59.47 to 55.89. Once this market reaches this zone, watch for profit-taking or short-covering to provide limited support.

August Gold

The stronger Dollar and weaker commodity prices are putting pressure on August Gold overnight. Speculation that the global economy will be mired in a recession for the rest of the year and into 2010 is driving weaker longs out of gold and to the sidelines. Other than relatively low prices, longer-term investors see no reason to want to own gold at this time as long as inflation is low and there remains the threat of deflation.

Technically, the main trend is down and getting stronger now that this market has crossed to the bear side of a retracement zone at 929.80 to 915.10. As long as this market cannot regain the lower end of this zone then look for lower prices with an eventual test of the April 30th bottom at 882.00.

Please do not hesitate to contact us at 1-800-971-2440, with any questions.

www.brewerfuturesgroup.com

futuresblog@brewerfuturesgroup.com

DISCLAIMER: Futures and options trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. In no event should the content of this correspondence be construed as an express or implied promise, guarantee or implication by or from Brewer Futures Group, LLC, Brewer Investment Group, LLC, or their subsidiaries and affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of options and/or futures positions such as “spread” or “straddle” trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information provided in this correspondence is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.


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