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 1447. But, perhaps more importantly, the distance above the 160-wma stands at+21% — down from a high of +28%. If it expands above +30%, then an upside explosion is under way, but under it — then a larger correction is expected to materialize.
WORLD MARKETS ARE RATHER MIXED THIS MORNING with Japan’s NIKKEI rising +3.5% due to the fact they left their QE campaign in place, and then “renewed and doubled” two other programs that were expiring. This was considered bullish for Japan; however, this bullishness hasn’t yet translated into much for the rest of the world. European bourses are mixed, with Spain being the largest loser at -0.7%. We view the recent rally in the major indices as part and parcel of a larger top building exercise, with perhaps new highs seen in the S&P 500 and NASDAQs, but not necessarily in the Dow Industrials or Dow Transports.
To Read the Entire Report Please Click on the pdf File Below