has happened 2 times already, on February 16 th
Thursday, March 11, 2010 and March 3 rd. If this were to occur again,
The Shelton Letter
James W. Shelton
James@tradersaudio.com
(859) 486-0100
The EUR, undeniably, enjoyed a bull market
from October 28 th, 2008 until December 3 rd,
2009, starting at 1.2333 trading up to 1.5137,
respectively. Knowing this, we shall analyze a
rather interesting price reaction off two
significant percentage retracements, the 50%
and 61.8% levels. When these percentages are
applied to the bull move start and end (prices
are listed above), one will notice that the most
recent consolidation, starting on February 18 th,
has bounced between them. The EUR,
currently at 1.3642, trades near the 50%
retracement 1.3730, a significant break above
followed by a close, would warrant a
continuance in bullish activity. Although, one
must not disregard a very viable possibility,
that being a bounce off the 50% level, as this
James W. Shelton
support will be found at the 61% retracement
of the large bull move, that level is 1.3410. The
market has acted on the support line, in a
similar manner that it did at the resistance
(50%). A break in this level would lead to
significantly lower prices. It also worth noting
that this most recent consolidation phase is
exceeding, in terms of time, the previous
consolidation that took place December 22,
2009 through January 13 th 2010, by a small
amount. Time is an element that holds more
significance than price, if this consolidation
continues for two more days; it may be very
wise to consider this formation of a base. Also,
one should take note that usually, the fourth
time a market approaches support and
resistance, a break follows.
Let us turn our direction to a topic affecting
markets quite significantly, Australian
employment. The Australian Bureau of
Statistics announced much worse than
expected Australian employment data, with
new jobs created coming in at only 400 while
expectations called for a creation of 15K.
Another element rather concerning was the
fact that the unemployment rate increased to
5.3% after revisions, like they always say,
better luck next time! Also, it is rather
frightening that Australia witnessed the largest
economic boom in the past three years; a pause
in continuation is not welcome. Furthermore,
this slow in economic growth justifies a
suspension of interest rate hikes by the
Australian central bank; this news brought the
AUD lower.
James@tradersaudio.com
Nearly every commodity trades lower as a
Chinese inflation, measured by the Consumer
Price Index, came in at 16 month highs, 2.7%.
(Chart to right) Many analysts had expected a
release of 2.5%. This report will continue to
increase pressure on the Chinese Premier Wen
Jiabao, who vowed to suppress inflation after
financial systems were flooded with extreme
amounts of capital by banks in attempt to
thwart the global recession. It also worth
noting that new loans had outpaced the
expectation of analysts, adding to the pressure
of an interest rate hike in China. The fact that
interest rate hikes are expected, drives down
commodity markets as purchasing will slow
while money becomes more expensive,
hindering growth.

As for US markets, we look for market

direction upon the Jobless Claims release. This
is an economic indicator that is compiled
weekly in effort to show the number of
individuals who filed for unemployment
insurance for the first time. The previous
release was 469 K, where as the consensuses
for today’s release ranges from 450 K to 470 K.

Today the Fed will auction of multiple

securities across the yield curve. I must point
out that yesterday the Treasury's $21 billion
10-year note sale saw some of the “strongest
demand since at least the 1980s”. Many claim
that any momentum left in equities will arise
as an asset reallocation occurs from bonds to
riskier assets, such as stocks. Do not expect this
to occur below the January highs, many funds
will hold off on buying until the S&P breaks
through the 1150 level and is able to hold this
into the closing bell. I find it suitable to close
today’s letter with an interesting fact. The
SPY, SPDR S&P 500 ETF, did in fact make a 52
week high today. Perhaps this is alluding to
higher future price action, we shall see.

James W. Shelton James@tradersaudio.com