The week proved to be somewhat eventful with the congressional election behind us now and the Democrats seizing control of the House and the Senate. Although the election hype may have played a part in the markets prior to the election, the reality is setting in that the elections and turn in party power may not result in a big overdue correction in the stock market as previously predicted. Furthermore, the election may not make a huge difference in the market near term.

On Tuesday, the interest rate markets rallied aggressively as a result of a rumor that one of the big US homebuilders is set to default on its debt squeezing the market. With the housing market the main source of US economic weakness these last several months, this rumor could be a trigger to weakness in the Dollar market longer term. However, at the moment the currency markets remain consolidated.

Thursday, the Chinese government made a comment that they will be further diversifying their $1 Trillion in reserve currency. No mention was made as to how or where they would be diversifying, but the market immediately rallied the gold and sold off the dollar.

Amongst other reports this week, the mortgage applications number came out surprisingly strong at 620.9 versus 570.8 as expected. This could translate into a firmer housing number next month. Theoretically, this should pressure the bond market as a sign of a strong economy. A strong economy should be able to withstand rate hikes to curb inflationary pressures. The highly anticipated International trade number was released at $64.3 Billion versus $66.0 Billion expected. As Gartman always says, the trade number really is not accurate because it doesn't include our mental resources in the trade. With the increase in goods being sent to China, the trade balance is expected to contract from its current levels. This does not mean that our economy is necessarily weaker.

Recommendation:

Sell 1 Dec. TY at 108-17.5. Risk the trade to 108-25.5 stop.

December Ten Year Note Technical Levels:

Trend Direction: Long term Trend Sideways, Short Term Trend is higher.

Resistance: 108-05.0; 108-18.0

Support: 107-22.5, 106-21.5

Chart Copyright CQG, Inc.

Financial Reports for the week of November 13th - November 17th:

Tuesday:
Business Inventories - 7:30 am CST
PPI - 7:30 am CST
Retail Sales - 7:30 am CST

Wednesday:
API/EIA Energy Stocks - 9:30 am CST

Thursday:
Weekly Jobless Claims - 7:30 am CST
CPI - 7:30 am CST
Real Earnings - 7:30 am CST
Capacity Utilization - 8:15 am CST
Industrial Production - 8:15 am CST
EIA Gas Storage - 9:30 am CST

Friday:
Housing Starts & Permits - 7:30 am CST