The U.S. Second Quarter GDP estimate came out at 1.6%. This was lower than the previous guess of 2.4% but better than the estimate at 1.3%.
Stocks rallied on the news and Treasurys broke. The Dollar index also rallied sharply higher. Remember, though, that these moves are just knee-jerk reactions to the report. In reality the GDP fell which isn't good. This may mean all of these markets have the potential to reverse their initial moves.
The Dollar will be especially sensitive to this data. The Euro may rally because the Euro Zone economy may be stronger than the U.S. economy at this time. The higher-risk currencies will benefit if the stock market rallies, but could fall if equity traders cannot sustain the rally.
It is amazing that the markets are reacting as if it is good that the economy weakened. This shows how starved these markets are for positive economic news.
After a few minutes traders will put the GDP report behind them then turn their focus to Federal Reserve Chairman Bernanke's speech later this morning. Traders want to hear Bernanke give some guidance but he's not likely to say anything to erase the fact that the GDP is weakening and the threat of a double-dip recession remains real.
Some traders are beginning to think that the Fed does not have much left in their arsenal to stimulate the economy. This may mean that Bernanke may call out the current administration for its lack of fiscal responsibility.
Let's hope that Bernanke speaks with clarity and conviction. The market wants answers now to help alleviate the current "crisis in confidence".
The September E-mini S&P 500 is trying to build a support base slightly above the week's low at 1037.00. Uptrending Gann angle support is at 1040.75 today.
On the upside, this market once again fell below a key .618 level at 1050.50. Regaining this level will be a sign that the market is absorbing the selling pressure. Downtrending Gann angle resistance is at 1063.75. Additional resistance is at a 50% level at 1065.25.
September Treasury Bonds are still trading inside of Wednesday's wide range of 136'31 to 134'31, but above yesterday's inside range. Also Wednesday's closing price reversal top pattern has yet to be confirmed. The current chart pattern suggests this market could get explosive above 136'31 and extremely weak under 134'31.
Although the reversal pattern has frozen the market at this time, there is no "real" resistance. However on the downside, if the reversal top is confirmed by a break through 134'31, then look for a possible acceleration over the near-term to perhaps 131'16.
December Gold made a closing price reversal top on Thursday, but this move hasn't been confirmed yet. A trade through $1235.10 will confirm the pattern and set up a possible break to at least $1228.90. A break under this level will be a sign that the selling is serious.
Gold has been sensitive to stock market movement lately. A sharp break in the equity markets could drive gold sharply higher. A stronger stock market could break gold.