Currencies and stocks are starting the New Year with a bang. On the heels of solid manufacturing data from China and an optimistic outlook for the New Decade, higher yielding currencies appreciated throughout the European trading and into the U.S. trading session. The broad sell-off in the U.S. dollar this morning indicates that risk appetite is driving price action in the foreign exchange markets. The Dow and Nasdaq climbed to a fresh 15 month highs as soon as the U.S. equity markets opened for trading and this momentum is reinforced by the strong U.S. ISM data.
U.S. Manufacturing Sector Chugging Along
In the month of December the ISM manufacturing index climbed to the highest level in more than 3.5 years. The details of the report were mostly encouraging with the new orders and employment components increasing. The increase in manufacturing activity should help to ease job losses in the sector. Despite the strength of the dollar last month, the manufacturing sector continues to chug along. The decline in new export orders suggests that the increase in demand could be domestic, which would be a nice change of pace. Also, the widening of the new orders-inventory gap points further increases in activity. The significant rise in the prices paid component indicates that inflationary pressures are beginning to return. Although construction spending declined for the seventh month in a row, the pace of contraction is not as significant as the average decline over the past year.
The big question this week is whether the U.S. Payrolls will rise for the first time in 2 years. Many economists are optimistic and believe that job growth has returned. Although we are skeptical, we recognize that the price action in the dollar reflects this same sentiment. We will reserve our judgment on payrolls until Wednesday's ADP, Challenger and service sector ISM reports after which we will publish our outlook for NFPs.
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Higher than expected manufacturing figures in the UK and Eurozone are boosting European FX against the deteriorating JPY and retreating USD. Nikkei-225 rose 1% to 10,654, closing above its 100-week MA. FTSE-100 is up 34 pts at a fresh 13-month high of 5447, facing its 200-week MA at 5552. GBPUSD regains its 200-day MA for the 4th straight day, testing the 38% retracement from the Nov high at 1.6236, which also coincides approx with the highs of Dec 18 & 31st. Next resistance emerges at Cable has usually extended its gains into the US session on days of stronger UK data and particularly in those of strong confirmation in the US. All eyes will be on US ISM at 15:00 GMT. SEE ECON CALENDAR for today's data as well as the rest of the week. http://bit.ly/5pdFANRead more…
Cable put in a big outside bar on the weekly chart. we have what looks like strong support at 19525-50 level. on the daily we have a similar downward channel which broke and held on close.
After the hanging man on the daily chart the DAX has started to retreat, which interestingly has coincided with the euro making a come back, although a time lag exists between the two variables.
Fibonacci retracements from last pivot low = 5880 = 38.2%, 5830 = 50% , 5780 = 61.8%
major red trend line on daily chart signifies resistance as it has been breached so previous support now = resistance.
we have a symmetrical wedge formation(black trend lines) that has broken out to the upside but it may be classed as a false break out so one must be careful as the market could bounce. Technical Analysis states that the market has a tendency to revisit the break out level as it shakes out the rookies before resuming its original direction , in this its northwards.
The engulfing candle on the daily can't be ignored as it was accompanied with large volume, therefore I will be playing this inside bar and opening up a short position anywhere in the 1880-1860 region with stop loss @ 1890 and target 1820.
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We Have No Evidence They Are, but They Could Be. We Do Not Know Source of Money That Pushed Market Cap Up $6+ Trillion since Mid-March.
The most positive economic development in 2009 was the stock market rally. Since the middle of March, the market cap of all U.S. stocks has soared more than $6 trillion. The “wealth effect” of rising stock prices has soothed the nerves and boosted the net worth of the half of Americans who own stock.
http://www.zerohedge.com/article/trimtabs-asks-who-responsible-non-stop-market-rally-march-gives-some-suggestionsRead more…
By InTheMoneyStocks.com on December 31st, 2009 4:23pm Eastern Time
The markets closed out the 2009 year with a sharp sell off in the last 30 minutes of trading as it appears institutions jumped ship prior to the new year. Profit taking may be signaling future early 2010 selling. Major calls continue to be spot on from the Research Center and Intra Day Stock Chat as swing trade shorts like MSFT at $31.50 are now up more than $1.00. In addition, master level $113.00 on the SPY which had been called out over 1 month ago, was the high on the markets for 2009 and probably a great cherry on top for premium subscribers who have gotten amazing calls all year long. Join us for 2010 to reap the rewards the 2009 member recieved. Chief Market Strategists at InTheMoneyStocks.com continue to believe the profits and calls will be as good, if not better and the volitility will be huge. Be ready to swing the market. Live, Learn, Profit!
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By Chief Market Strategist Gareth Soloway on December 31st, 2009 12:26pm Eastern Time
Over the last few days the markets have hovered flat as many sectors have pulled back. While technology and commodities seem to be stalling out, a few short term leader has emerged to take its place, keeping the market flat and not allowing it to pull back significantly. The financial stocks have stepped in to keep this market strong as they have roared higher the last few days. Stocks like GOLDMAN SACHS GRP (NYSE: GS), JP MORGAN CHASE CO (NYSE: JPM), WELLS FARGO & CO NEW (NYSE: WFC), MORGAN STANLEY (NYSE: MS) have all raced higher.
The financial stocks leading this market this week was actually not a surprise to me. In fact, going back as far as last weekend I made a call in my free Weekend Technical Analysis Video that is seen by tens of thousands around the world that the financial stocks would keep this market in check and steady into year end. How did I know this? That is what I will reveal to you all.
It really is not rocket science. That is the beauty of what we do here at InTheMoneyStocks.com. It is really just understanding and reading the charts accurately. Each chart is like a book. Each book says something. It is up to each and every once of us to learn the language and read it correctly. As noted last weekend in my free Weekend Technical Analysis Video, the financial stocks were all forming beautiful in spirit of Bull Flag patterns. From Goldman Sachs to Wells Fargo, they all had the perfect setup. In addition, technology and many other sectors had taken the market higher over the previous week or two. This left little doubt in my mind there was a high probability that they would be the sector to keep this market steady. We all know at this point the markets were not going to dump in a major way into the year end. Trust me, the government does not pump trillions into the market and the economy only to have it wither and die at year end. So the question was just which sector. Sure enough, financial stocks to the rescue.
Below is a chart of Goldman Sachs Grp (NYSE: GS), showing the in spirit of Bull Flag patterns I noted for free to the world last weekend. Enjoy the education. Live, Learn, Profit.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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By Nicholas Santiago on December 31st, 2009 12:33pm Eastern Time
How long can the Fed funds rate stay at zero percent? This is the overnight lending rate from the Federal Reserve Bank to the large banks such as J.P. Morgan Chase (NYSE:JPM), and other giant institutions. In June of 2009 the 10 year Treasury yield reached a high of 4.00% and this was really the only pullback in the stock market since the March 2009 bottom. Obviously the higher yield hurts the mortgage market. The key 10 year bond yield is now creeping back up toward that level again. Today the yield traded as high as 3.92% intraday. The Proshares Ultrashort 20+ year Treasury (NYSE:TBT) has risen from $42.00 on October 2nd, 2009 to $51.00 on New Year’s Eve. That is a better than 20 percent gain in three months for this ETF. The iShares 20+ long Treasury Bonds (NYSE:TLT) has done the opposite, however, this is a onetime ETF so the percentage loss is about 10.00 %.
So what is the point and who really cares? Well, considering the Federal Reserve Bank has been buying all these toxic mortgage assets and artificially trying to keep the yields low so the housing markets can try to recover it is unlikely that they want to see rising rates. Since the government started the modified mortgage program (program that helps people stay in their homes who can't afford to by reducing their payments by 20 percent) nearly 40 percent of the homeowners who enrolled were delinquent within one year. If the key 10 year Treasury yield raises this cannot be good for the so called economic recovery.
Many will argue that a rise in the rates or a step yield curve helps the large banks such as J.P. Morgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Citi Group (NYSE:C), and Bank of America (NYSE:BAC). This is true if they were lending money or making loans. Everyone knows they are not and are simply making money by purchasing Treasuries. Remember when yields go higher Treasury Bond prices decline. This suddenly seems like the creation of another Frankenstein by the government and the Federal Reserve Bank.
Is this the next bubble in the making? What is going to come from all of this craziness? Many say this is the new normal. Perhaps it is. Will inflation take over the deflationary tailspin that the country is in? There are a lot of questions that remain unanswered. However, the last time that the bond market spoke this year the stock market listened.
Nicholas Santiago,
Chief Market Strategist
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The US DOLLAR INDEX could be sending signals similar to those in July 2008, when the bottoming process turned into a full fledged rally that was boosted by massive deleveraging in equities and commodities. The fact that the current USD rally is emerging despote strengthening oil and stocks suggests more powerful USD dvances ahead at the next downleg in equities. We will closely watch horizontal-shaped 100-week MA, currently at 78.90, which proves as the main barrier to the important 81.40 level, currently the 50% retracement of the decline from the March high to the November low. USDJPY has already hit the 93 target projected for Q1, but it's mostly yen weakness that is driving the move rather than USD strength. *** WISHING YOU ALL THE BEST OF WEALTH & HEALTH IN 2010 & BEYOND ***
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