Monday, January 11, 2010

Catching Market Themes for the Day

Note this morning how the euro has broken out of its recent multi-day range and is logging new highs vs. the U.S. dollar (USD). USD has been trading weaker since the unemployment release on Friday; that has buoyed gold, oil, and copper and has given a firm tone to U.S. stocks. Sentiment appears to be that the Fed will not be raising interest rates soon, which is supportive of a weak USD and strong commodities. This also suggests that the yield curve will stay steep for longer than many traders have expected, supporting the earnings of banks.

I will be watching these themes this morning to handicap the odds of a continuation of the risk rally during the day session for stocks. Identifying themes that are moving markets can be very useful in catching opportunities for continuation vs. reversal of market moves.