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Choppy Trade For Global Equities


Global equity markets overnight were mixed with losing markets outnumbering markets clawing out gains. While the US markets are starting out on a positive footing, the headlines overnight favor the bear camp with stories suggesting the sharp holiday retail sales rise of 8.5% (according to credit card companies) could now result in “an extended holiday return period”. With treasury yields breaking out up overnight following a disappointing 5 year note auction yesterday today’s midday 7 year note auction could send yields even higher thereby undermining equities.

S&P 500: Despite the inability to hold yesterdays’ new high and despite a record daily US infection count (from Monday), the US markets have a positive tone to start today. However, as indicated already today could be an interest rate concern day with yields popping overnight.

Other US Indexes: Like the S&P, the Dow futures have fallen back from yesterday’s record high but remain within striking distance of that high this morning in a fashion that leaves the bull camp with a slight technical edge. As indicated already, significant holiday sales are usually followed by significant “returns” and given the surge in online sales, the returns this year could be extremely difficult for tech-based internet companies to digest. Nonetheless, the bias is up in the NASDAQ to start today.


DOLLAR: While the most likely track in the dollar index today will be sideways chop, traders should be on the lookout for a new trend signal. In fact, if equities fail and the record omicron daily infection count in the US from Monday rekindles uncertainty that could rekindle the bull trend from the summer/Fall rally.

EURO: As in the dollar the euro could be facing a key trend decision today. Given the protracted downtrend in the euro and 40 days of sideways consolidation chop we look for a major bottom in the euro ahead. On the other hand, for the euro to breakout up and began a sustained uptrend will likely require “recovery currency” conditions which in the current case means a partial clearing of the omicron threat.

YEN: While the trade has suggested the December slide in the Japanese Yen was primarily flight to quality liquidation, the currency has now reached critical consolidation low support at 87.00.

SWISS: With the Swiss forging impressive gains since late the November low, regaining a critical 1.09 level on the charts and with the potential that omicron could be judged as less severe, the path of least resistance in the Swiss is pointing up. Unfortunately for the bull camp a Swiss KOF leading indicator reading for December came out more than two points below the prior reading.

POUND: Not surprisingly, the Pound has stalled this week after regaining a key level of 1.34 and after it failed to rally off reports that the infection rate in the UK fell below 100,000 several days ago. On the other hand, given the surging infections in the US, it is difficult to argue against the omicron variation being extremely contagious and that could result in a rebound of UK infection counts.

CANADIAN DOLLAR: With the Canadian government moving to provide more aid programs to fight omicron economic headwinds, the Canadian has some hope of holding near the 78.00 level.


Apparently, the treasury markets have lost (at least temporarily) bullish resiliency, as prices have broken out down this morning and reached the lowest level since November 29th. Not surprisingly, the downside breakout is not easily attributable to a specific fundamental development. In fact, one might have expected treasuries to have seen flight to quality buying following a record daily US infection count from Monday of 441,278 cases! Yet another potentially supportive development discounted in this morning’s trade is a Bloomberg leading indicator study projecting only moderate growth in the Chinese economy in the month of December. Perhaps the trade saw soft demand for a 5 year note auction yesterday as a sign of deteriorating interest in fixed income instruments, as interest was not stimulated by the highest short-term yield since March 2020. Looking ahead the trade today will be presented with additional news from the US housing sector and the trade balance, both of which might provide temporary lift/short covering action. The North American session will start out with a weekly private survey of mortgage applications, followed by the November goods trade balance which is expected to have a moderate increase from October’s $83.2 billion monthly deficit. November wholesale inventories are forecast to have a moderate downtick from October’s 2.3% reading. November pending home sales are expected to have a sizable downtick from October’s 7.5% reading.

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

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Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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