- Technical Analysis & Commentary -

August 3, 2009 (FinancialWire) (Investrend Information Syndicate) — Last week, global equity markets were rising overnight as the People’s Bank of China promised to maintain its loose monetary policy designed to support its economic recovery.  The day before the Shanghai Composite Index, the basis for the Morgan Stanley China A Share Fund Inc. (NYSE: CAF), sold off 5% on the fear that China’s central bank would apply quotas to control credit growth.  The news made equity investors less risk averse.  Adding to the bullish sentiment in the equity markets was the news that European telecom earnings have been coming out better than expected.

The bullish news triggered a strong rally overnight in the U.S. equity markets.  The September E-mini S&P 500 (CME:ES) challenged the high for the week at 984.00.  The September E-mini Dow (CME:YM) equaled its weekly high at 9114.  Finally, the tech-weighted September E-mini NASDAQ (CME:QCN) made a new high for the month.  Resulting expectations were for a gap higher opening when the U.S. markets resumed trading last Thursday morning.

The rise in the equity markets is contributing to the weakness overnight in the Treasury complex.  Investors are selling September Treasury Bonds and Notes as the need for a safe-haven investment is diminishing.

Yields were also rising ahead of the July 30th $28 billion Treasury auction.  The week’s auctions were disappointing.  Investors expressed concerns about the huge amount of debt the U.S. has to issue this year.  Demand was as strong as expected.

The U.S. Dollar was also under pressure as the equity market recovery made investors less risk averse.  The September Euro showed gains overnight.  European confidence in the economic outlook increased more than economists expected in July.  That is another sign that the recession may be bottoming out.  Gains could be limited to the upside as unemployment rose in July.  This news may keep consumer sentiment down because of employment uncertainty.

Chart watchers should note that the overnight rally was also a technical bounce off the .618 retracement level at 1.4013.  Regaining 1.4069 could help the market accelerate to the upside.

The weaker Dollar also triggered a rally in December Gold.  On July 29th that market completed a .618 retracement of its recent 907.60 to 962.70 range at 928.70.  Regaining 935.20 could be a sign of higher markets to follow.

Demand for riskier assets helped September Crude Oil recover some of its losses from last Wednesday.  July 29th’s break, which was the largest since April, was triggered by a bigger than expected increase in inventory.  Technically that market is finding support in side of a retracement zone.  Look for support at 63.00 with a possible acceleration to the upside if 64.15 can be regained.

Note: The original source and author of the above article was Brewer Futures Group, LLC.  The original content was submitted on July 30, 2009.  The submitted content has been modified by FinancialWire(tm) to accommodate publication on the date noted in the above article’s byline.

For more information, content and/or a preferred introduction to Brewer Investment Group, LLC and/or Brewer Futures Group, LLC, contact Investrend Communications via resources@investrend.com with “Brewer” in the subject line.

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