Despite Record ES Highs, Withdrawals from US Equity Funds Continue.
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KEY ECONOMIC RELEASES THIS WEEK
Friday's strong rebound & close on the Dec Mini S&P was supported by a strong support pattern building on the 4 hour chart which suggests the market still has enough upward momentum to hit the 2080 level. It would appear though that tighter resistance bands may begin to form at this level. A lack of significant data for the week may provide a pullback in buying sentiment. Additional barriers to upside momentum this week may also be triggered by a cycle of yearend profit booking as well as developing allocation strategies which may begin to seek out new opportunities in emerging markets and alternatives.
Reports for the second month continue to highlight increased withdrawals from US domestic equity funds. (Click here for recent article highlighting this reallocation trend). Decisions regarding global capital allocations seemed poised to evolve based upon new parameters of risk/reward measures and seeking out renewed levels of volatility. Whether this is a positive or negative element of a renewed confidence based upon the notion of working with the "houses money" remains a question. The downgrade of Japans debt by Moody's could be signaling a "Beast from the East" as entitlements & financial obligations may begin to highlight once again the concerns of increasing national balance sheets. The tug of war between seeking opportunities vs. honoring domestic entitlement commitments could result in a "global warming" which may spark a new round of market volatility (Just when we thought it might be safe?)
As for potential market direction this week, look for upside spikes in the EMIni S&P to make a possible try for 2080.50 level. Expecting an initial spike through that level as stops may likely be triggered, perhaps pushing for an initial top at 2083.00. If selling pressure begins to form, a pullback to 2072.25 may develop. Expect the next level of support from this range at 2065.25, with 2064.75 in particular developing as a price point to observe. A significant change in the upward direction of the Emini would likely be triggered by a drop & consolidation at the 2041.00 price level.
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About the author-Richard Roscelli has been a member of the futures industry since 1994. His unique background in the Global Futures markets stems from his experience managing trading desks and providing market analysis for major financial institutions and commodity trading advisors.
After earning an MBA in Global Business, Richard is a co branch manager and licensed commodities broker with the Las Vegas branch of Attain Capital Management, a multi service futures brokerage firm. He is also a registered investment advisor with Cathay Consultants Ltd and contributes regularly to financial websites regarding alternative investments, financial planning, & trader education.
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