After Federal Reserve Chairman Ben Bernanke pledged to provide
ongoing cheap money to financial markets, equities and growth assets
surged upwards. But with markets anticipating some sort of injection of
liquidity, much of the move may have already been priced-in, pointing
to the potential for a pullback in the short term. Two charts highlight
this quite well: the broad S&P500 Index and the course of the
Canadian dollar.
1. S&P500: Below we can see a potential reversal pattern two days ago. This chart shows that the market shot up to multi-year highs in early trade, but couldn't maintain its path, was met with selling interest, and then closed at the low of the day's trading range. This type of trading can indicate that demand in the short term has been met.
2. Canadian Dollar: On the same day, the Loonie
exhibited almost identical trading action. CADUSD shot up in early
trade, almost hitting 1.0400 against the USD, only to meet with selling
interest and finish at or near the day's lows, indicating that demand
for CAD may have been met for the short term.
Watch these two assets closely going forward, as they are both fair
thermometers for the health of the global economy, and seem to suggest
that we may have gotten a bit ahead of ourselves at this stage.
1. S&P500: Below we can see a potential reversal pattern two days ago. This chart shows that the market shot up to multi-year highs in early trade, but couldn't maintain its path, was met with selling interest, and then closed at the low of the day's trading range. This type of trading can indicate that demand in the short term has been met.
Source: SunGard MarketMap 2012
Source: SunGard MarketMap 2012
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