STOCKS:
The European debt contagion has been “kicked down the road” as Spanish and Italian short-and-long term bond yields have moderated recently given the ECB “plan” to buy bonds of up to 3-years in maturity...but only if asked; and only if conditionality is imposed upon those asking. The Fed has also changed its game from “inflation-fighting” to “unemployment fighting;” and with any war — they will go further and farther than anyone believes in printing money to achieve their ends.
STRATEGY: The S&P 500 remains above the 160-wma long-term support level at 1255. The much followed 200-dma support level stands at 1387, and was regained in bullish fashion with bullish key reversal higher. Collectively, this stands bullish for a test and likely brekaout above the recent September highs at 1475. We want to be long of gold, energy and transports at this juncture.
NOTE: We are having difficulty updating our OLE links for our charts and spreadsheets into our production program. We apologize for the inconvenience, but it shall only impact the charts in the Model Portfolio and StockWatch Area. We’ll be back to normal on Monday. Once again, please accept our sincerest apologies.
WORLD MARKETS ARE DITHERING THIS MORNING WITH THE LONE EXCEPTION BEING CHINA: Quite simply, the US and European markets look at bit tired from the news flow of watching and waiting for the FOMC to confirm what many had already discounted – a move to purchase US Treasuries and to increase in the Fed’s balance sheet. Ultimately, this shall increase the monetary base, which is the soup of economic activity. Also, we would posit the US “fiscal cliff” negotiations are taking far longer than any investor/trader though; and this is causing them to take a back seat for the moment.
In all, today is Friday – and most are happy that the Holiday Season is up and running. Turning back to China, the move off the recent lows has been rather breathtaking to be sure; and this morning’s move was due to the fact that the private HSBC PMI data showed a rise to 50.9 – its fastest rise in 13-months; and highest since October-2011.
We’ve talked on being long China, and how to do so. One of the easier ways to do so would be to own the China ETF (FXI), but if one look at the chart of this ETF…one would see that it had already bro ken above its 200-day moving average before the China rally started. Hence, we see some risk in FXI, but then we must look towards the second derivatives for China – commodities and commodity stocks.
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