Equity Futures Moving Higher

No laughing now! We are actually seeing positive trade out of the equity futures market, and although the three main markets, Japan, Europe, and the U.S., have dropped a record number of points in the last 24 hours, we can see futures buyers bidding up prices.

Whether that can translate into a full-blown reversal of the selling remains to be seen, but it has to be respected that stocks may be in for a day of consolidation (no selling), and at best in for a day of discount buying in certain sectors.

Forex pairs are aligning themselves to new fair value areas against the USD and the JPY, and as we have seen in mid-morning European trade that means that intra-day reversals are in play, following commodity market swings. The oil market has found a base at $70 for now, and a technical bounce higher from there may be on its way.

The dollar may now struggle to hold this weeks gains as the liquidity efforts from regional central banks start to feed into the markets, and the realization hits that the cost of this global rescue will lay mainly at the feet of the Federal Reserve. The amount of money that has been reportedly pumped into this rescue package, and subsequent lines of liquidity are staggering, and once confidence is returned to the credit markets it may weigh heavily on the dollar index. We will look for the test of support at 80.00 over the course of next week, and be ready to sell dollars if it fails to hold.

The U.S. has a very low overnight interest rate, an unparalleled debt mountain that is nothing other than an interest only 50 year mortgage, inflation running out of hand when compared to return on investments, and a growth outlook that may not show economic income until 2010.

As such the major pairs may be able to regain lost dollar ground quite easily once the flight to the safety of U.S. debt is negated by regional liquidity finding its mark. All global regions are struggling with growth, the question for the rest of 2008 will be, which regions are better equipped to deal with a changing global trade environment. With huge forward debt obligations the Usd may just find itself under pressure next week, IF global equity markets find a base of sorts to work higher from.

Comments

[Nikola]

Don't bet against the dollar. I did and lost.

Dollar sucks. US economy sucks. US masters suck.

But guess what. The Europeans are spineless servants of the US. It's even worse there. You think Americans are spoiled because they borrow too much money? The French borrow just as much, and work 34 hour weeks and take month long vacations. Talk about being spoiled. Inflation is far worse in Euro zone than in the US.

Who else? Japan? C'mon.

Chinese yuan actually might be a contender, but the Chinese are not gonna let yuan appreciate too much against the dollar. Maybe a few percent for show. Anything more than that and Chinese goods are too expensive. And what with the trillion dollars they hold? They are just gonna let it evaporate?

So.... dollar sucks. Euro sucks more. Japan has been dead for two decades. China will legislate its currency.

The dollar is dead, long live the dollar!

2008 Oct 16 06:07 AM