NEW YORK ( TheLFB-Forex.com ) -- Currency pairs moved back to their opening prices after Asian session trade saw Usd selling. The moves were reversed as European futures markets sent S&P 500 equity prices lower off a test of 1292 resistance, to settle around 1285 ahead of the London price fixings on oil and gold. A bout of intra-day Usd buying coincided with weaker than expected U.K. GDP numbers, which sent Gbp lower against all major counterparts and created a Usd buying move that could not however transpose itself to other pairs.

Tight ranges on Aud and Cad do not reflect the fact that global commodity prices have dropped 3-5% over the last few sessions. Jpy and Chf trading in the same tight ranges do not reflect the volatility in global interest rate markets. Eur and Gbp had been levitated higher on the strength of Federal Reserve-backed equity buying that has floated stocks higher on incredibly light participation levels. That is something Gbp will now rely upon to retrieve the overnight pip loss in reaction to a preliminary GDP read that garnered far more algorithm attention than seemed logical.

The dollar index remains anchored at 78.50 and seems to be having a hard time attracting buyers in the near term. The index is easily holding main 78.00 support and created a 4-hour chart triple bottom that does target 82.00 if equity trade drops S&P Futures down to test 1265 support.

Global market trade has signaled a major swing point, with commodities trading out of sync with equity and dollar trade. Interest rate markets are absorbing a raft of regional Bund, Gilt, and Treasury noise that is coming from all quarters as governments step in to protect their own views on fair value.

Gold does not generate a new long signal until 1350 is broken and held on a weekly chart basis, in-line with silver closing through 27.50. A new long-oil signal will not be seen until WTI closes a weekly chart above 89.00. None of the three price points look to be in any danger of getting hit in the near term. Short signals for the next leg lower are gold under 1320, silver under 25.50, and WTI oil trade under 86.00, all of which could pressure equity values and allow the dollar index the chance to play catch-up.

Even in the high velocity, low-volume trading world of global equity trade, where fair value is set each day by the Federal Reserve Bank of New York as they manipulate trade between the Fed's Primary Dealers in an effort to monetize QE2 doctrines, it may be difficult to stop a test of 1265 support on the S&P 500.

However, these are unique times, with new normals to absorb each day, which lead to having to bank early and bank often, at least until an increase in global participation levels return. If not investors will suffer the same fate as 2009, and early 2010, when reversals hit as soon as the punch bowl of Federal Reserve back-stops were removed. In that environment intra-day futures reversals of 1-2% are not only tolerated but expected. Long term investors in stocks are still waiting for the last decade to turn positive, with 1250 on S&P 500 trade a benchmark that just will not go away nor will it be easily broken and held, either long or short.

The S&P 500 index ended 2010 at 1257.64, just slightly higher than that level. Although it gained 13% for the year, the 2010 close was only 28 points, or 2.3%, higher than its 1998 close.

S&P 500's 1250 Tipping Point:
  • December 1998: 1250. On the way to 1574 in a 87% gain from the October 1997 lows.
  • February 2001: 1250. On the way to 767 in a 51% drop from the December 1998 highs.
  • November 2005: 1250. On the way to 1586 in a 107% gain from the February 2001 lows
  • July 2008: 1250. On the way to 665 in a 58% drop from the November 2005 highs.
  • December 2010: 1250. Closed with a 88% gain from the July 2008 lows.
  • This confirms once again that the buy-and-hold mantra is outdated. Once we factor in inflation, the index's return has been negative over the last 12 years. The ride hasn't been quiet however, as seen in the moves listed above. The index has seen big intra-day swings, 100% yearly reversals and the birth of a new generation of high-frequency trading that has come to dominate futures exchanges worldwide.

    Marco Hague is one of the founders and principals of The London Forex Broadsheet (commonly known as TheLFB), a global forex trader portal with headquarters in the U.S. Hague began his career with the Bank of England dealing with foreign exchange control, and he has been trading for the last three decades. He has been involved with institutional risk asset ratio analysis and the implementation and maintenance of institutional trade desks globally.

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