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Stock Markets To Finish The Quarter With Huge Percentage Gains

Stock-Markets / Financial Markets 2009 Jun 30, 2009 - 08:42 AM GMT

By: BrewerFX

Stock-Markets

Best Financial Markets Analysis ArticleThe September British Pound surged to the upside overnight despite news that the U.K. economy shrank more than previously forecast. The U.K. Gross Domestic Product report showed that during the first quarter the economy suffered its biggest contraction since 1958. Weakness was seen across the board in the economy as everything from construction to services showed some sort of weakness.


The three-month long rise in the British Pound has defied most analysts who are in the same camp as Bank of England Governor Mervyn King who believes that the road to recovery will be long and hard. Even if the global economy is beginning to bottom, the U.K. economy still faces rising unemployment. This is a lagging indicator, but if unemployment continues to march higher then eventually consumer spending will suffer. If consumer spending falls along with confidence then the economic recovery may slow considerably.

Although the fundamentals do not support the 90-plus day rally, there are signs this morning that a top may have been reached. Earlier this month the September British Pound formed a pair of tops at 1.6660 and 1.6620. The subsequent break from the highest high dropped this market to 1.5790. The break was short in duration and never really attracted heavy selling pressure. The quick recovery from this bottom was a sign that this market was not ready to correct despite the build-up of negative fundamentals.

Following the release of the news regarding the U.K. Gross Domestic Product, traders drove the September British Pound through the two main tops to reaffirm the uptrend, but ran into selling pressure following the test of a major 50% retracement price at 1.6723. The actual high before the sell-off was 1.6742.

A lower close today following the higher-high will be a strong sign that the selling is greater than the buying at current levels. This pattern could set up the Pound for a substantial correction especially if the recent bottoms at 1.6185 and 1.5790 fail to hold.

Trading is mixed in the Treasury markets overnight. Bonds and Notes have been trading on both sides of the market. The recent surge in prices in both of these instruments in the face of increased supply was probably due to end-of-the-quarter position adjustments. This means the current rally may be short-lived.

Equity markets surged to the upside yesterday after early morning weakness then the market died. Volume and volatility were both light as traders lacked the conviction to take these markets higher. Fundamentally, investors are looking ahead to the U.S. Unemployment Report on July 2nd as well as the U.S. market holiday on July 3rd. Both of these events are keeping most traders on the sidelines. The beginning of earnings season next week is also curtailing demand for equities at this time.

Equity markets are going to finish the quarter with huge percentage gains. It is doubtful that these markets will be able to maintain the pace of these gains during this quarter without first going through a normal correction.

If you use the September E-mini S&P 500 as your indicator then you should be watching for a possible secondary lower top formation. The completion of this type of pattern will be a sign that this market is getting ready to rollover to the downside.

There are two scenarios developing for which traders should be watching. The first is the overnight market pattern. The Main Range is 953.00 to 884.25. This creates a retracement range at 918.75 to 926.75. The second is the day session pattern. The Main Range is 952.75 to 884.25. This range creates a retracement zone at 918.50 to 926.50.

Combining the two charts creates a key resistance price at 926.50 to 926.75. Watch how the market reacts at these prices. If this market cannot penetrate this resistance zone then look for the start of a decline. The first downside target will be 913.50. A close under this price will put the market lower for the month and form a monthly closing price reversal top which is often a very bearish signal.

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DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. 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. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from B.I.G. Forex, LLC and Brewer Investment Group, LLC or its subsidiaries and/or 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 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 contained in this correspondence is intended for informational purposes only and was 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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