STOCKS:
The European debt contagion has been “kicked down the road” a bit further 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.
STRATEGY: The S&P 500 remains above long-term support at the 160- wma at 1228; which delineates bull/bear markets. The much followed 200-dma support level stands at 1353, and remains the bulls “Maginot Line.” We’ve noted this is perhaps one of the “weirdest rallies” we’ve ever seen, and it causes us a great deal of consternation. But the new Fed policy is directly at stocks; expect an S&P all-time high test at 1576.
WORLD STOCK MARKEST ARE MODESTLY HIGHER THIS FRIDAY as a rather “boring” week has transgressed into today’s trade. The very same issues that were on the table last week are on the table this week; ECB, FED, BOJ an PBOC easing monetary policy; European 10-year note yields are moving lower; there is a rumor of a Spanish bailout request to come in the very near future.
There is very little else to report on in the economic sphere because with all this “liquidity” being put into the markets it all matters very little. But be that as it may, yesterday’s jobless claims figures rose a bit, while the Philly Fed index remained negative…showing contraction.
Thus, the markets are in the nether-lands, and we can only rely upon price action, and for the moment – it is rather good in the sense is that it is corrective. This means “buy the dips” until major support is violated – which in our mind is when the S&P breaks below roughly 1395. Until then, buying stock with bottoming patterns and well-defined risk points is where we should be trading.
Today, we want to add another long position in Freeport- McMoran (FCX), which has recently broken out above long-term resistance at its 300-day moving average and corrected back to this very level. We are doing so given the bullish copper chart show on page 1 in the lead chart position; note the bullish consolidation breakout and positive model underpinnings.
Copper looks to move sharply higher; and if it has a PhD in economics – then it means the economy is about to strengthen – with copper moving to new highs. FCX is the best way to play this move. Outside of this, we’ll sit tight with our current positions; and consider the environment as it develops.
To read the entire report please click on the pdf file below.