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. This will support all asset prices ultimately; but not at present.
STRATEGY: The S&P 500 remains above the 160-wma long-term support level at 1241. The much followed 200-dma support level stands at 1377, and remains the bulls “Maginot Line.” We’ve noted this is perhaps one of the “weirdest rallies” we’ve ever been witness to, and it has caused us a great deal of consternation. Now, weakness is prevelant; too early in our opinion, but sufficiently so our downside target is 1375.
THE NYSE AND OTHER EXCHANGES WILL OPEN TODAY although we do not know just how liquid trading shall be given that the exchanges are all running on backup power; and many Wall Street offices are uninhabitable. The NYSE prides itself on being available for trading through “thick and thin”, and this is laudable and aggressive. Today is the final trading day of the month; so there are some buying pressures in the market that we are seeing early this morning in the S&P futures and other commodity markets.
However, today is also the end of the fiscal year for many financial companies, with this current move towards a “riskon” trade may very well be fleeting. Also, we should point out that Europe is rallying on the surprise conference call amongst the Euro zone finance ministers, although we would be rather optimistic to see anything come of this call; Greece has been given more time yet again, with Spain jockeying for better terms for its bailout…playing a rather dangerous game of “chicken” with the Euro zone authorities. Spain’s PM Rajoy is a ditherer, and we’ll be become much more concerned when we see Spanish bond yields start their rally higher again…which may come sooner rather than later.
Outside of this, corporate earnings around the world continue to show a greater-than-expected deceleration. Overnight, both ArcelorMittal and Anheuser-Busch InBev disappointed; this morning US manufacturer Eaton disappointed – saying that its markets.
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