U.S. stocks rose, adding to the Dow Jones Industrial Average’s best two-week rally since 2000, as the biggest jump in new-home sales in eight years overshadowed disappointing results from Aetna Inc. and RadioShack Corp.
Centex Corp. rallied 9.1 percent to lead a gauge of homebuilders in the Standard & Poor’s 500 Index to an almost three-month high, and Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. also climbed. Aetna and RadioShack lost at least 2.7 percent each.
The S&P 500 added 0.3 percent to 982.18 at 4:10 p.m. in New York, the highest level since Nov. 4. They increased 15.27 points, or 0.2 percent, to 9,108.51. The Russell 2000 Index added 0.4 percent to 550.88, the highest close since Oct. 14.
“When you’ve got a good rally, people want to jump in,” said Jonathan Vyorst, senior vice president at New York-based Paradigm Capital Management Inc., which oversees about $1.5 billion. “The potential for mediocre earnings is out there. But if there are a couple good surprises, the market will likely take off.”
The Dow average surged 12 percent in the two weeks before today after companies including Caterpillar Inc. and 3M Co. reported earnings that beat estimates and a gain in existing home sales added to signs the recession is easing. The S&P 500 ended July 24 at its most expensive valuation since September, trading for 16.23 times profit from the past year.
The Commerce Department reported U.S. new-home sales climbed the most in eight years in June, in a sign the deepest housing slump since The Great Deal is starting to stabilize.
Treasury Auctions
Treasuries fell, pushing the yield on the 10-year note to the highest in over a month, as the U.S. began selling a record $115 billion in notes. The U.S. sold $6 billion in 20-year Treasury Inflation Protected Securities at a yield of 2.387 percent, higher than forecast. The Treasury will sell 2-, 5-, and 7-year notes over three days starting tomorrow.
The yield on the benchmark 10-year note rose six basis points, or 0.06 percentage point, to 3.72 percent at 2:55 p.m. in New York, according to BGCantor Market Data. It touched 3.76 percent, the most since June 22. The 3.125 percent security maturing in May 2019 fell 15/32, or $4.69 per $1,000 face amount, to 95 5/32.
The dollar traded near the lowest level this year against the currencies of six major U.S. trading partners on speculation the global economy is shaking off the worst recession since World War II, sapping safety demand.
Daily Technical Analysis
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EURUSD Outlook
The EURUSD mad indecisive movement yesterday. The pair attempted to push higher, hit a seven week high at 1.4297 but closed lower at 1.4242. We are getting closer to the key level 1.4336. Only a clear break above that area should give us a bullish view towards 1.4719 area. Until that happen, I still prefer to keep stay out. We have been patiently waiting for several weeks now so it should not be a problem to wait just a little more (I hope). Immediate support at 1.4150. Break below that area should trigger further bearish pressure towards 1.4050
GBPUSD Outlook
The GBPUSD attempted to push lower yesterday, bottomed at 1.6380 but further bearish pressure was rejected as the pair whipsawed to the upside, hit the top at 1.6522 and closed at 1.6490. On h4 chart below we can see that it was a case of a false breakout from the rising wedge formation. The bias is neutral both in nearest and medium term. Immediate resistance at 1.6590. Initial support at 1.6380. Break below that area should trigger further bearish momentum.
USDJPY Outlook
The USDJPY had a moderate bullish momentum yesterday. The pair has been able to stay above key level 94.60 in the last three days. The bias is bullish in nearest term testing 96.05 area but remains neutral in medium term. CCI almost cross the 100 line on h4 chart suggesting potential upside pressure
USDCHF Outlook
The USDCHF made indecisive movement yesterday, formed a Doji formation on Daily chart. On h4 chart below we also have triangle formation indicating consolidation. We have no clear direction so far, so stay away from the market. Immediate resistance at 1.0750. Consistent move above that area should trigger further bullish pressure towards 1.0900. Initial support at 1.0620. CCI in neutral area on h4 chart
EURJPY Outlook
The EURJPY had a bullish momentum yesterday. The pair breakout from the triangle, topped at 136.08 and closed at 135.59. This fact should set up bullish view for us. The bias is bullish in nearest term targeting 138.90 area. However CCI in overbought area and heading down on h4 chart so watch out for a potential downside rebound testing 134.90. Break below that area should lead us back into no trading zone.
GBPJPY Outlook
The GBPJPY had a bullish momentum yesterday, topped at 157.45 and closed at 156.95. The bias is bullish in nearest term. However, on h4 chart below we seem to have good resistance around 157.59, a double top formation which suggests potential downside rebound testing 156.00 area. Break below that area should be seen as potential threat to the bullish outlook. Break above 157.59 should trigger further bullish momentum targeting 158.50.
AUSUSD Outlook
The AUDUSD had a bullish momentum yesterday, topped at 0.8258 and closed at 0.8229. We are in critical point now and about to see whether this bullish momentum is strong enough to break above 0.8261 area and set up a bullish view for us towards 0.8500 area. Immediate support at 0.8170/50 area. Break below that area should trigger further bearish momentum
Gold Bounces Back to $950/oz
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Gold has popped back above $950/oz to our 1st tier downtrend line as the previous metal builds a new psychological base. However, we do notice some rising action to the downside for a couple hours yesterday, so investors should monitor volume over the next couple sessions to see where interest lies.
While gold is tempted to pop higher towards June 10th highs and our 3rd tier downtrend line, investors are standing on the sideline as they monitor the S&P’s interaction with its own psychological 950 level. Gold and U. S. equities are positively correlated, so any immediate-term breakout past 950 and 2009 highs in the S&P’s could result in sizable gains in the precious metal.
Near-term momentum is in favor of the uptrend even though the market as a whole is has experienced some hesitation from investors over the past 24 hours. We notice similar consolidation in both the EUR/USD and GBP/USD. Therefore, today’s session could be important in determining whether gold takes the next step to the upside, or opts for near-term downward consolidation. Gold has our 1st and 2nd tier uptrend and 1st tier downtrend lines to fall back on along with July 20 lows.
Copyright 2009 FastBrokers, Latest Forex News and Analysis for Forex, Bullion and Commodity Traders.
Disclaimer: For information purposes only. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained. There is a substantial risk of loss in trading futures and foreign exchange.
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