Monday, January 31, 2011

Late Night Correlation Update & China PMI (SPY)

Gold, S&P, EUR/USD, Dollar futures

Interesting night so far, we had spot gold bidding hard then give it all back as well as Spoos bidding only to give it all right back. The S&Ps touched 1288.50 on a rather odd volume spike of 6k contracts around 9:30 eastern only to trap traders long as they traded back to 1282.75 before finding 1283 support. The EUR USD cross saw bidding most of the evening before falling off in conjunction with equity markets.

The move in equities tonight in my opinion is clearly a reflection of traders sentiment over China's PMI which showed slowing growth and increased inflation with hints at a possible rate hike. I think we saw
inflation today reflected in RICE futures closing limit lock up as well as steel prices rising dramatically.

 I am looking for tomorrow's S&P resistance to be 1288 and support around 1280, 1280 is in my opinion weak support because this markets tepidness trading up near the 1300 level. Yes it is 20 handles away but still close enough with the current tensions around the globe. With the dollar still not giving up the beans yet, 77.70 failed tonight yes, though i still find the dollar resilient.

Nasdaq again is leading equities, so keep an eye on where the NQ_F trades as the S&Ps will surely follow.

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