I can’t remember who said it last week but there was a characterisation of the Senates as the Adults of American politics and the House as more child like. Overnight – or should I say this week we had proof that this is probably correct.
Harry Reid and Mitch McConnel and their colleagues have done the right thing by the US economy in the short term by stitching up the deal to reopen the government and raise the debt ceiling. But if I look down the road and back through history it seems that at some point the US is likely to default either outright or by stealth.
For the moment though it seems someone put Ted Cruz in a headlock and he has said he won’t seek to block the vote which is super news for the Americans affected by this, the economy and of course global markets which positively loved the news of the deal overnight.
The deal extends the Debt Ceiling until February 7th and gives the Government funding till January 15 which now become the big dates to watch. But while the newswires and the TV business shows might want to focus on the can kicking traders are unlikely too get caught in the hand wringing about having to do this again – they’ll face it if it happens.
So at the close the Dow is up 206 points to 1.36%, the Nasdaq rose 1.19% and the S&P 500 was up an enormous 24 points to sit not far from the all-time highs for a rally of 1.41%. Europe didn’t rise as much but that was because they had performed better the previous day and the US bounce pulled them out of their swan dive. The FTSE closed up 23 points at 6572 but it had been down at 6504 before US markets opened so it really is a strong day. The DAX rose 0.47%, the CAC – somehow – managed to fall 0.28% while in Madrid and Milan stocks rose 0.75% and 1.45% respectively.
On the Sydney Futures Exchange the SPI 200 rose 17 points to 5268 bid.
5321 is the next big level for the SPI 200 to break up and through. As you can see in the chart below it is the recent high and although the SPI did not manage to pull back as far as the 38.2% as I would have preferred but a break of this level would still be very important and decisive with a target of around 5600!
The US market and the S&P in particular will be important – but watch this space.
On forex markets the Aussie dollar just keeps keeping on and is the stand out against the US dollar and back at 0.9550ish this morning and up against the crosses. The Euro (1.3531) is hardly changed, GBP (1.5949) lost 0.31% while the US dollar gained against the Yen (USDJPY 98.74, +0.6%) as the safe haven bid disappeared from the Yen.
Looking technically the Aussie had a break and then retracement of the break back below 95 cents over the past 36 hours but is now on the move again.
The target on the dailies is 0.9770 which is the 138.2% Fibonacci extension of what – at this point – looks like a classic rally to 95ish, pullback to 38.2% support and now break and extend of the highs. This is classic Fibo trading and the strongest longer term signal in my armoury. I simply love this pattern.
Equally as I have noted yesterday the Weekly Aussie chart is still pointed higher which supports this outlook and a close above 0.9550 is very bullish.
On commodity markets just when it looked like Nymex crude was going to break below important support it rallied 0.97% to $102.19. Gold was 0.71% higher to $1281 and copper sits at $3.30 lb. On the Ags, corn was 0.28% lower, wheat fell 0.62% and soybeans rose 0.83%.
ON the data front there could be a raft of data from the US once the Government re-opens as it tries to catch up. This could cause volatility but equally the closure is going to impact on the results of economic data in the week’s and months ahead as we all try to re-calibrate released data for the impact on it from the shut down.
So the Taper is probabaly further away than it otherwise would have been and perhaps not till next year at the earliest now.
On the day we have NAB Business Confidence, the RBA’s FX transactions, retail sales in the UK and inital jobless claims in the US.
Cheers, good luck and good hunting.