Thursday, March 11, 2010

U.S. equity markets are expected to open weaker this morning but off their lows. Last night’s news that China’s inflation was higher than expected, fueled speculation of a rate hike
which helped drive down demand for higher yielding assets. The lack of follow-though to the downside has triggered a short-covering rally which is helping to boost equity prices from their overnight
lows. Yesterday the March E-mini S&P 500 stopped at its January high of 1148.00, triggering a profit-taking break. The overnight rally from its low and building momentum could trigger another
test of this level today. The daily swing chart suggests a breakout over this level will ignite a rally to 1156.00 by March 12th.

June Treasury Bonds are trading lower. Traders are selling Treasuries in anticipation of a rate hike by China. Technically, this market is hugging a 50% line at 116’04. This price
will dictate the direction of the next move. Holding above it means the market is discounting the news. Falling below it will indicate a further drop to 115’06. Today’s Weekly Initial Claims Report
should …