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North American Indices: Markets Stabilize on
Conflicting Developments |
MarketTrends: November 3,
2009
Issued by Colin Cieszynski, CFA, CMT,
Market Analyst, CMC Markets Canada
Equity markets continue to stabilize today
after big losses last week as a number of conflicting developments left
investors continuing to search for direction. On the positive side, Ford
(F) continued to build on yesterday’s positive earnings news with the
announcement that October sales were up over year, and above street
expectations. It also was a big day for takeovers as Warren Buffet’s
Berkshire Hathaway launched a $100/share, $44 billion takeover bid for
railroad Burlington Northern (BNI US) while toolmakers Stanley Works (SWK)
and Black & Decker (BDK) agreed to merge in a $4.5 billion deal. Mr.
Buffet’s deal appears particularly significant. With a renowned value
investor stepping up to the plate in a major way even after the big
bounce of the last six months suggests that some investors still see
value out there and could be viewed as supportive of a long-term
recovery trend. It also suggests that sentiment believing that the
global economy has turned the corner continues to grow.
The main question that continues to hang over
markets, however, is how fast might a global economy recovery be and
have equity prices factored this in, or have expectations, previously
too despondent, become too optimistic for now? News overnight of a
second round of UK bank bailouts appears to have tempered recovery
expectations somewhat, leaving equity bulls and bears in balance once
again. This can be seen in the Dow Industrials (US30 CFD), which have
stabilized in the 9,700-9,800 range over the last couple of days with
next resistance near 9,900 and support near 9,600.
It appears that investors may now be looking
toward the big economic developments scheduled for later in the week to
set the tone for the rest of the month and perhaps the rest of the year.
Tomorrow a US FOMC interest rate decision is scheduled. Investors may
key in on any comments related to the pace of economic recovery in the
US and any statements related to their emergency liquidity programs
particularly on how or when they may be removed. Later in the week, UK
and ECB interest rate decisions and employment reports for the US and
Canada may also be closely scrutinized.
Commodities Update: Resources Drive Ahead
on US Dollar Drop
Commodity markets have been generally positive
today with precious metals leading the way higher along with grains,
which suggests that renewed USD weakness may be playing a key role in
supporting this rally along with recent crop reports. Gold has broken
through the $1,075/oz level and has been trading above $1,085. Next
potentially significant resistance may appear in the $1,125-$1,140/oz
range based on measured moves from previous trading ranges. Silver has
also been on fire today, storming through $17.00/oz with next resistance
near $17.50 then $18.00/oz on trend. Selected grains have also been
moving up today with soybeans leading the way breaking through
$10.00/bushel followed by corn which has been trending toward a test of
$4.00/bushel resistance.
While copper and crude oil have also been
advancing today, they have remained short of key resistance levels and
continue to trade in the $77.00-$80.00/bbl and $2.90-$3.00/lb ranges
respectively. Natural gas has been under pressure again today, possibly
due to warm weather, sliding below the $4.25/mmbtu level.
Canadian Dollar Today:
The loonie has started to bounce back today
against a number of currencies propelled by a rebound in commodity
prices and a weakening USD. Most significantly, even though the RBA
raised interest rates overnight, CAD has continued to turn the corner
against AUD.
CADUSD Notes
CADUSD has been steadily advancing today after
successfully holding above its 100-day average over the last couple of
sessions. Today, the loonie broke through resistance at $0.9280 and its
50-day average near $0.9350. Next resistance looms in the
$0.9400-$0.9500 range.
USDCAD Notes
USDCAD has been steadily dropping today after failing to break through
its 100-day average over the last couple of sessions. Today, USDCAD
broke down through support at $1.0760 and its 50-day average near
$1.0700. Next support appears in the $1.0600-$1.0500 range.
Other CAD Pairs Notes
GBPCAD turned sharply lower again today as
bank bailouts weighed on GBP. The pair has been testing $1.7500 support
with next support near $1.7400.
EURCAD also has been moving in the loonie’s
favour, dropping off quickly after failing to overcome resistance at the
$1.6000 level. Initial support appears near $1.5600 and $1.5475.
Unlike the last time the RBA raised rates,
AUDCAD has continued to struggle today, drifting below $0.9650 support
and trending toward a retest of $0.9500. This suggests that resistance
at the $0.9800 level remains formidable.
CADJPY also has been bouncing back today
testing resistance at the 85.00 level with next resistance near 86.00
then 90.00 with support near 82.50.
Asia Pacific Market Preview
With US markets bouncing back today we may see
Asia Pacific markets attempt to shrug off yesterday’s losses although
rebound attempts may meet with limited success ahead of tomorrow’s US
Fed decision. The Hang Seng (HongKong33 CFD) may test 21,100 support
with resistance near 21,600 then 21,900. The S&P/ASX 200 (Aussie200 CFD)
dipped into its 4,400-4,500 support zone last night and faces resistance
near 4,575 and then 4,650. The Nikkei (Japan225 CFD) continues to trade
in the 9,600 to 10,400 range.
