Demand for risky assets appears to be back this morning following yesterday’s bullish comments regarding the economy by Fed Chairman Bernanke, positive comments from Warren Buffett regarding the economy and a renewal of M&A activity.

Yesterday Fed Chairman Bernanke fueled the rally in the stock market by stating that the recession is “very likely” over.  Although some traders feel that this news had been already priced into the market, traders are buying stock again early this morning as the equity market continues to be the best game in town for investors.  

Additional upside pressure is coming from positive comments from Warren Buffett who told investors he is buying stock.  He has been positive on the stock market since last fall so although this comment is helping to drive equity markets higher, it should come as no surprise.

New M&A activity is also helping to heat up the markets.  The NASDAQ market is reacting positively to the news that Adobe may buy Omniture.  This is helping to fuel rumors that additional M&A activity may take place.

You can’t fight the trend and it doesn’t make sense to try to pick a top at this time.  1059.00 has been a target for a while in the September E-mini S&P so there may be a reaction at this price.  Furthermore, investors have been comfortable buying dips so with today’s market expected to be higher on the opening; it will be interesting to see if they chase this market higher or knock it down before buying again.

The U.S. Dollar is trading weaker on the opening.  With the Dollar offering the lowest yield, it still makes sense to buy the other currencies.  Activity is picking up on the long side again in the December Japanese Yen after a few days of weakness.  Investors are optimistic about the economy now that the administration has changed.  Although the Euro Zone economy is still trailing the U.S. economy, the December Euro is attractive because of the higher yield.  Investors are also being drawn to the December British Pound despite the weaker U.K. economy.  The currency markets are being driven higher entirely on demand for risk.

December Gold finally broke out to the upside over the $1000 barrier after several days of backing and filling.  The weaker Dollar has a lot to do with this move.  Usually equities break and gold rallies in September so it’s hard to accept that both of these asset classes can sustain their upside momentum.  One of them has to give.

December Crude Oil remains flat despite strong movement in other commodities.  Supply and demand factors remain the key issues controlling these markets.  Today’s S&D report will shed some new light on this situation.  A strong surge in the Euro could be the catalyst which drives crude oil higher but traders are definitely approaching the markets with caution until they see the inventory report.

November Soybean and December Corn markets surged to the upside yesterday on reports of the possibility of an early frost.  Since much of the crop was planted late, speculation is they may be susceptible to damage because of cold weather.  Oversold conditions are also contributing to the bullishness as well as the weaker Dollar.  Traders are looking for foreign demand to pick up.


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