STOCKS: The world economy is has begun to heal if we look at the PMI figures across the world. However, there remain clear headwinds to the continuation of this healing, like speed-limiting higher interest rates. Quite clearly, we feel risk is being mispriced at current levels given the economic backdrop and developing pressure upon corporate revenues/margins/ earnings. But, the QE pillars and unlimited Fed communication regarding low interest rates continue to hold traders’ sway.
STRATEGY:
The S&P 500 remains above the 160-wma long-term support level at 1434; and the standard 200-dma support level at 1682. But perhaps more importantly, the distance above the 160-wma has regained the+28% level that denotes a potential “bubble-like rally” threshold. If it expands above +30%, then an upside explosion is under way. For now, the +30% level has proved its merit. Occam’s Razor anyone?
GLOBAL MARKETS ARE ON BALANCE “HIGHER” THIS MORNING as market participants await the December US jobs report. Let’s first note that China was weaker once again, but Europe continues to open their 2014 sessions higher, while dropping during the days. We view this as distribution to a certain degree, and this morning they have opened higher and remain there. Volume is slack in lieu of the 8:30am ET jobs report. There is simply nothing more to worry about today, or to trade upon – for trading is likely to be volatile indeed. We already see the S&P futures higher by +8 points after being flat into early this morning.
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