“FORECAST”
STOCKS: The world economy is healing; however, there remains clear headwinds to the continuation of this healing...such as the emerging market risk-reassessment. Quite clearly, risk is being mispriced at current levels given the economic backdrop and clear pressure upon corporate revenues/ margins/earnings — not to mention the contined QE taper glide path.
STRATEGY: The S&P 500 remains above the 160-wma long-term support level at 1441; but perhaps more importantly, the distance above the 160-wma stands at+24% — down from +28%. If it expands above +30%, then an upside explosion is under way; but under it — then a larger correction is expect to materialize.
THE TALE OF TWO REGIONS – ASIAN BOURSES CLOSED HIGHER, WHILE EUROPEAN BOURSES ARE NOW TRADING LOWER: This is all due to the delayed impact and realization that Turkey’s central bank move last night to raised their financing interest rates from 7.75% to 10.00%. This caused the Turkish Lira to surge initially, for this move was not expected in terms of just how aggressive it really was. Moreover, this caused the Asian stock markets and the S&P futures to rally rather strongly; however, when European markets opened – they opened higher, but are now trading lower along with the S&P futures. This circumstance should have been expected, for there is very little that Turkey can do to stop the “raid” upon their currency.
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