Although Asia Pacific markets kicked off the week last night with a big catch-up rally, European and North American markets have spent their sessions consolidating Friday’s gains. News flow has been very quiet today on both the corporate and economic fronts. The few developments we have seen today have generally been supportive including Portugal jumping on the fiscal austerity measured bandwagon, positive Canadian housing starts and the ongoing cleanup of AIG with MetLife (NYSE: MET, Stock Forum) agreeing to purchase the American Life overseas business for $15.5 billion.
Although the strong upward momentum of last week appears to have slowed, we don’t appear to have seen an increase in selling pressure or profit-taking. Rather, markets appear to be holding at higher levels, which suggests that investors may just be waiting for more developments to catch up to market valuations while keeping the longer-term bullish trend intact. News flow is very quiet through Wednesday but picks up again toward the end of the week with a number of Chinese economic announcements Wednesday night, trade data for the US and Canada on Thursday and the US retail sales and Canadian employment reports on Friday.
North American indices: indices hold above recent breakout points
Although indices have been consolidating today, it’s important to note that they continue to do so at higher levels and that the resistance levels which were broken last week appear to be emerging as new support levels. This suggests that current trading appears to represent a normal consolidation within a wider bullish trend.
The Dow Industrials (US30 CFD) have been holding near 10,500 with support at 10,500 and resistance looming near 10,600 followed by 10,725. The S&P 500 (SPX500 CFD) has been holding in the 1,125-1,130 area with support near 1,120 and resistance near 1,150. The FTSE has been holding just above 5,600 with next resistance near 5,650 then 5,750. The S&P/TMX 60 (Toronto60 CFD) continues to hold just above 700 but below key resistance at 705 with a move toward 730 possible on a breakout.
Commodities update: commodities mostly hold steady
Commodities have been trading flat to slightly lower throughout the day -- essentially consolidating within current trading ranges as investors wait for more developments. Copper, for example, has been trading in the $3.35-$3.45/lb range. US crude has been holding within the $80.00-$82.50/bbl range. Gold has been trading mainly in the $1,120-$1,140/oz zone while silver has been bouncing between $17.15/oz and $17.50.
Once again, natural gas has been underperforming, dropping back to test $4.50/mmbtu once again. With temperatures rising well above freezing in consuming regions, investors seem to be looking past heating season into shoulder season. If we did get a snap back to colder weather, natural gas could bounce but traders should recall that cold weather bounces have been getting smaller and shorter as the winter has progressed.
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.