S&P 500 sets new closing high as US dollar weakens and sterlings rallies hard

November 14, 2013

A very interesting past 12-15 hours as Asia exited and Europe took up the bearish cudgels not many would have predicted that the S&P 500 would make a new closing high – but so it is this morning with the S&P 500 up at 1782 for a 14 point or 0.81% gain. The Dow is up 0.44% and the Nasdaq rose 1.18%.

But notwithstanding this fact Europe is the most interesting port of call overnight with the BoE upgrading its growth forecast (2.8pc next year, from a prediction of 2.5pc in August) and the ECB defending the recent rate cud (Weidmann, Bundesbank Head) and not ruling out the use of unconventional policies such as quantitative easing (ECB executive board member Peter Praet in an interview with the WSJ)

The result of course was that GBP (1.6018) rallied and Euro (1.3455) sold off. But whereas Sterling has stayed strong Euro bounced off a low of 1.3389 and is actually up 0.15% on the day – still lagging GBP’s 0.68% gain but a solid recovery nonetheless.

In other FX markets the Aussie dollar (0.9327, +0.26%) got a lift as the US lost a little strength and USDJPY (99.38) respected the trendline resistance up near 100.

The Aussie found support in the target zone we identified last week and has bounced a little as the US dollar was weak overnight.

I’m not sure on the day how this plays out but a move through the 4 hour fast moving average at 0.9331 there is a 40-50 point rally in the AUssie and support remains the lows of the week. A break of either zone opens further moves.

In Europe stocks were lower with the FTSE having its worst day in 3 months falling 1.44% to 6,630. Losses were smaller on the DAX and CAC which fell 0.24% and 0.56% respectively. Spanish stocks were 0.34% lower while in Milan stocks tumbled 1.43%.

Closer to home on the Sydney Futures Exchange the SPI 200 contract fell 1 point to 5334 bid.

SPI 200 fell yesterday but is closing in on support. I sold SPI yesterday at 5393 and then closed it out at 5330 yesterday afternoon for a non-market related reason. But as you can see in the chart below there is some solid support in the 9260/70 zone.

While the overall outlook on the dailies is for a test of this trendline there is a major time frame conflict between the dailies, pointing down, and the hourlies and 4 hourlies which suggested the overnight low was a little exhaustive in these shorter time frames. SO the market might rally a bit today – maybe back into the 5360’s region but overall my bias is to sell again soon.

On commodity markets Bitcoin is on a tear again and busted $400 with a run to 429, it sits at 423 at present. Nymex Crude ($93.91, +0.87%) is bouncing from near the bottom of a 15 month trendline which comes in at $91.31 Bbl. Gold fell 0.22% at $1273.20 while silver lost 1.41% to $20.48. On the Ags only Corn moved losing 0.52%.

On the data front New Zealand retail sales are out and Japanese GDP and Industrial production data. There is nothing of note in Australia for traders although i note the ABS is realising a report on whether Australia is becoming a better place to live.

Tonight could be huge for the Euro and European stocks with French, German, Italian, Portuguese and EU wide GDP along with UK retail sales. In the US its jobless claims and the big one – we hear from next Fed Boss Janet Yellen.

Have a great day and good hunting

Greg

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