STOCKS:
The fundamental backdrop is volatile: the Italian election is not yet resolved in terms of a sitting government; US “sequestration” is in place; and China continues to “dampen” their housing market. These issues, coupled with the “troika” bail-in decision placed upon Cypriot depositors, increase the risk-premiums on stocks. Too, lest we not forget that the ISM and Chicago manufacturing surveys surprised to the downside in March — which puts pressure upon corporate margins/ earnings.
STRATEGY: The S&P 500 remains above the 160-wma long-term support level at 1295; and the standard 200-dma support level at 1446. Now, with prices into major long-term overhead resistance, they are finding “rough sledding” as prices aren’t able to make much headway. Hence, the risk-reward is towards lower prices, which is confirmed by a number of our short-term models.
WORLD MARKETS ARE ALL HIGHER with the Asian bourses leading the charge higher as both Japan’s NIKKEI and China’s SSE Comp have risen rather sharply. First, Japan’s NIKKEI gain of +0.73% reflects the yen’s drop against the USD as G-20 members don’t seem to have much issue with the “collateral damage” of a plunging yen given the Japanese move to double the monetary base. The reason they don’t’ have a problem with this now is that southern European bond yields are moving lower as many believe that the “yen carry-trade” is being put back on in force. While this may be the “salve” du jour that heals the wound, but the disease remains in place…too much debt.
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