In Monday equity trade in U.S. closed holding the higher ground, after a clean break straight through the 200 day SMA area on the S&P to close out higher by over 3%. The morning session followed the path of least resistance and moved things higher in-line with better than expected U.S. results from Pending Sales that although still poor were good enough to spark a rally that never looked like moving back.
The afternoon rally came as the NYMEX markets closed at 14:30 EDT after posting strong oil gains, and then there was a late day surge to close the day deep in the green to reverse the yearly loss on the S&P.
The previous week has moved sideways in equities, and by doing so has negated any potential movement in currency and commodity markets, to the greater degree. But that was all negated in trade on Monday when the dollar found sellers across the board in U.S. trade after managing to hold positive ground in light volume Asian and European trade.
The Federal Reserve has laid claim to buying the Treasury market at all costs, and as such has created a slew of notes that are being introduced to the market in numerous auctions between now and September. It seems as though the mutual funds were forced to get long stock positions to start to move away from the safety blanket of the Usd and bonds. The Fed wants cheaper value notes, both bills and Treasuries, and history tells us that the fed invariably get what they want; that equates to Long Equities, and A Short Dollar.
On Monday the NYSE posted gains that averaged 3%. The DOW was on 8426 after a gain of 214 points (2.6%), while the S&P traded at 907, higher by 3.3%, and the technology-heavy NASDAQ traded at the 1763 area, after moving up by44 points (2.58%).
The European markets were higher in trade on Monday, and able to spark plenty of positive momentum. The German Dax closed at 4,902 (+2.8%), the London FTSE was closed for the U.K. bank holiday, and the French Cac 40 stood at 3.237, a gain of 2.5%.
Financial Sector: In trade on Monday the XLF, the financial sector ETF, gained 1.08 points (10.14%) to trade at 11.73, and extended a very positive period of trade ahead of the Stress Test results from the U.S. banking sector on Thursday. It moved higher don slightly lower volume; 212m ETF's changed hands, above the ten day average of 190m. Without a solid period of trade from the banking sector the main equity markets are going to struggle to hold the higher ground, and although just still chipping away at 12 month loses this move increases the Financial Sector value dramatically from the test of $6 in March.