Overnight Action:

S&P Futures:

S&P futures were in a general downward drift in Asian and early European trading. Yesterday’s market action was not decisive in any direction. For most of the Asian session, the futures were in a side way range. European session saw a fresh down move and emini was lower by -4.00 at 6:00 AM EDT. Then ECB president Mario Draghi spoke at a London meeting revitalizing markets hope that ECB is determined to do something to improve the deteriorating economic conditions in the Eurozone. The futures jumped twelve points.

This seems positive but the market has been jittery for too long and it is looking for a lifeline every which way only to be disappointed. So it is not sure if this will sustain.

Asian Markets:

Shanghai Composite does not seem to be getting any respite. It closed at the lowest level since the week of March 16, 2009. The global market turned around after the 2008 debacle in the month on March 2009. So the growth engine of the world, China, is getting back to the starting point. It has closed down ten out of last 12 closes.

Nikkei 225 is getting clobbered by the strength on Japanese Yen. It is close to testing the June 4, 2012 low. Hang Seng closed up for the day and could be in the process of making a turn around. Wednesday’s price action was a reversal candle and now it needs to overcome the 19000 resistance level (107 point or 0.57% away).

Sensex closed down by -1.22% driven by margin-calls rumors, which prompted sell-offs in midcaps, real estate and capital goods sectors.

European Markets:

President Draghi’s comment initiated a turn-around for the DAX. Just before his speech, DAX was making new low below July 10 low support level. Since then it is in the process of making a sharp reversal candle. If the move persists till the close and if it goes above Wednesday’s high of 6475.33 then it will be hugely positive.

European markets across the board are moving higher.

• FTSE 100 +0.59%
• CAC 40 is up by +1.24%
• STOXX 600 is up by +0.88%
• Spain is up by +1.62%
• Russia is up by +1.17%

Bonds:

US 30 Year Bonds (ZB) surged from Tuesday morning till early hours of Wednesday. Then it took a leg down till Wednesday’s US session open only to drift upwards. President Draghi’s comment tanked it this morning. Now ZB U2 is 19 bps below from yesterday’s 4:00 PM EDT and is close to making a 3-Day candlestick reversal pattern.

Commodities:

Crude Oil also reacted similarly and now is up by +0.99 to 89.96. It is in the process of making a turnaround and getting ready to challenge the July 19 high of 92.94

The comments from London made Gold breakout of a symmetrical triangle – a bullish signal – and now it is on its way to challenge June 6 high of 1642.4

Copper is also in the process of completing a short term reversal pattern by moving above previous two day’s high. Though it has some overhead resistance levels, it may be forming a short tem bottom.

Currencies:

Yesterday, Dollar index completed a three-day reversal candlestick pattern by closing below Tuesday’s low – the day it made a fresh 52-week high. Today morning’s price action is a continuation of that pattern. However, since May Dollar index is making higher highs and higher lows supported by the 50-D SMA and that trend is not yet broken.

EUR/USD is showing some signs of revival and is up to 1.2280 more than its 10-D ATR. The same is the case with other major currencies. All are gaining with respect to the US dollar.

EUR/USD’s next resistance level is at around 1.2325. GBP/USD is moving toward the upper bound of a symmetrical triangle. The resistance is at around 1.5725.

USD/JPY did not react as well but it is trading in a narrow band between 78.00 and 78.25.

USD/CHF is making a similar reversal (bearish) pattern like that of the Dollar index. If it breaks the support level of 0.9750 then it may go down to 0.9600 level.

The resource currencies – Aussie, Kiwi and Loonie – are all surging against the US dollar. AUD/USD is getting ready to go above the July 19 high of 1.0448, which is the highest that it has reached since April 30.

Since June 21, NZD/USD has traded within a range bounded by 0.7840 and 0.8075. Today morning’s price action is taking it above the halfway point of this range to the upper limit.

USD/CAD has come very close to breaking below July 19 low of 1.0066, which is a two month low. The next support is 1.0048 at Fib level of 61.8% of the last significant move up. The support after that is 0.9939 – 78.6% Fib level.

Key Levels for July 26, 2012: