Equity markets have started off the new trading year on a positive note, suggesting that some investors may be ready to turn the page on 2008 and seem to be starting to look to the future with something other than fear or dread. For example, equities have not only advanced since the release of the ISM Manufacturing report, they actually have accelerated. The December Manufacturing index was 32.4, down from 36.2 in November and below the 35.4 street estimate, suggesting that current conditions remain weak. Investors appear to be more focused, however, on the Prices Paid component which fell to 18 in December from 25.5 in November and was below the 20 street estimate. This suggested that inflation remains benign which can give governments and central banks room to continue trying to stimulate economic activity for now.
With a number of market participants still off on holiday today, even though resistance from tax loss selling may be gone, markets may still encounter significant resistance at key levels such as 9,000 for the Dow Industrials (US30 CFD), 925 for the S&P 500 (SPX500 CFD), 1,250 for the NASDAQ 100 (NDAQ100 CFD) and 565 for the S&P/TSX 60 (Toronto60 CFD). These levels represent the upper boundaries of recent trading ranges. Even if these happen to be breached today in light trading, investors may be looking to Monday’s trading when everyone is expected to be back, for insight into which market trends may be developing for the first part of the year.
Commodity markets have started out the year on a mixed note. While gold and grains have started out a bit soft, note that corn has been holding above $4.00/bushel, while wheat has been holding above $6.00/bushel, indicating investor support may be increasing. Meanwhile, copper has been climbing, breaking through $1.45/lb, along with silver which has been moving toward a test of $11.50/oz. Crude oil has staged a big move up today toward a key resistance test at $45.00/bbl. For the last month, US crude has been climbing in a step pattern of advances followed by consolidation at higher levels. While current support appears near $41.00, a break through $45.00 would suggest that a new upleg on trend may be underway toward a test of previous resistance in the $50.00-$52.00 area.
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This commentary is based upon technical analysis. Technical analysis is the study of price and volume and the interpretation of trading patterns associated with such studies in an attempt to project future price movements. Technical analysis does not consider any of the fundamentals of an underlying company, and as such is inherently uncertain and should not be the only factor considered by an investor in making an investment decision.
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