Macro Morning: US blast off

Stocks hit their highest level since 2007 overnight as a combination of continued Fed buying and better than forecast US data saw traders focus on the positive. The US dollar came under pressure again as a result which saw the euro and many commodities including gold and silver rally and the tone was overall more positive as risk tolerance seemed to improve.

My rhetorical self doesn’t like nor trust the rally but for the moment the trader and trend follower in me has the upper hand as the market continues to push higher. Indeed I really like the comment I saw on the Wall Street Journal this morning:

“The S&P 500 is at a five-year high, transports sit at record levels and small caps are within spitting distance of all-time highs. Junk-bond prices are also hovering around record territory and the market’s so-called fear gauge sits near a five-year low.”

We hate this phrase more than anyone, but it sure seems tempting to wonder if maybe, well, the stock market just wants to go higher.

Sure we can and will worry about the debt ceiling and sure we will find other things to worry about but it seems that the Draghi shock and awe threat and the Fed’s money drop have really done their job for sentiment. Hasn’t helped the unemployed in Europe yet might it might be finding traction in the US with Job Claims dropping to the lowest level in a few years.

Elsewhere the Philly Fed data were appallingly weak printing -5.8 in January against 7.1 expected but this was overshadowed by better than expected housing starts and building permits data in the US for December. Both these data are the best in around 4 years.

So with 8 minutes to go the S&P 500 is up 9 points or 0.64% to 1482, the Dow is up more than 89 points or 0.66% and the Nasdaq has risen 0.59%. Worth noting on individual stocks is that Boeing is still under pressure from its Dreamliner woes and the financial sector is also off a little after the earnings reports from Bank of America and Citigroup disappointed.

In Europe it was also a positive night with the FTSE up 0.46%, the DAX up 0.57% and the CAC up 0.96%. Milan rose more than its bigger market rivals after recent weakness to close up 1.42% while Madrid was up 0.56%.

In Asia yesterday the Nikkei was roughly unchanged after a volatile day’s trade where it fell sharply before recovering. The weakness in the Yen which re-emerged overnight will however take it higher today and add to the positive tone coming from Europe and the US. The rest of Asia should benefit as well.

Dollar/Yen – my goodness – this is certainly a bull market if ever I have seen one. Every time USDJPY looks like it is going to have a reasonable retracement it simple gets bought back hard and with gusto. Over the past 24 hours the Yen has weakened 1.74% against the USD to sit at 89.90 and just below the nights high of 89.92. The euro was also higher up 0.68% to 1.3378 and it too is just below the high of 1.3387. The Aussie has missed out on the rally after the employment data yesterday and my sense is that we are seeing a rotation away from last year’s safe harbour and safe haven trades. Indeed EURCHF is up at 1.2475 this morning – what a rally.

There is no way my sell off in gold is going to happen in the ebullient mood of the market at the moment. I note that my bearish outlook has been joined by Goldman Sachs who are reported to be calling it down to $1200 by 2018. That is one heck of a long term forecast and one I have great sympathy but for the moment the US dollar’s weakness is dominating.

Technically gold is climbing into the upper half of the down trend channel it has been in for a few months with last nights small rise of 0.37% to $1689 oz and as you can see my usual indicators suggest some further strength is in store.

gold, gold price quote, xau, xauusd

Silver is looking like it might rally a bit further as well and it rose 0.86% to $31.74 oz. Crude spiked through two trend lines last night after the Algerian rescue operation went badly and even though it is off its highs it is up 1.22% to $95.39 in WTI terms. Corn was down 0.92% while wheat and soybeans both fell around 0.3%.

Lets have a look at some Meta 4 charts from my  AVATrade platform.

EUR/USD: 

Euro didn’t breach the lows of the previous night yet neither did it break the highs of earlier this week – so on the 4 hour chart above we have a Darvas style box with the parameters of 1.3404 to 1.3255. Waiting for a break a break is probably the best strategy for the moment…

eur, eurusd, euro, euro (eur) price quote

AUD/USD:

It was a poor performance for the Aussie all things considered but the low overnight was just above some minor support of the recent uptrend as you can see in the chart below. If we are genuinely seeing traders and investors turn their minds to the trends that might emerge in 2013, as it seems they are for the moment, I expect the Aussie to lag. Not get sold heavily but be becalmed is probably the best way to think about it relative to other moves – crosses are the play:

aud, audusd, australian dollar, australian dollar price quote, audusd chart

Data

China China  China, Oi Oi Oi. For the Aussie dollar as well as global markets it is going to be about Chinese Q4 GDP to be release today with expectations for 2.3% qoq and 7.8% yoy. Industrial production and retail sales are also released for China today as is industrial production for Japan. Tonight is fairly quiet in the US and then a holiday Monday.

Twitter: Greg McKenna

Here is how the markets looked at 7.48 this  morning.

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Comments

  1. Frankly I think that the growth prospects for the US are better than ours. I’m sure there will be the usual pull back, but long term I believe it has legs.

    • It will be interesting to see what the mood is like when the next “debt ceiling” deadline comes up. The current rally seems more trading than investing to me.

      Agree with the US/AUS growth prospects. US has had their major rebalance, AUS has not, yet

    • Old news, for sure, but where is this USA growth going to come from? Place like Aussie, that’s where…! “At the Detroit motor show this week, Holden inadvertently confirmed the Commodore’s run is due to come to an end in late 2016 the same expiry date Ford had previously given for the Falcon.” It will be replacement growth; repatriated growth. Good for the USA, but for us? Not until we have had our pull-back will we be into our growth phase.

  2. If Goldman Sachs is saying $1200 Gold they are probably buying it hand over fist about now. That said 2018 leaves enough time for the parabolic/bubble phase to playout, so who knows they could be right 🙂