S&P hits a new high, USDJPY trying to break out

November 15, 2013

The markets ripped higher again taking comfort that the new Chair of the Fed Janet Yellen is going to keep going with quantitative easing.

At her Senate confirmation hearing there wasn’t too much angst and in many ways it went off without a hitch and with some significant deference from most Senators which is a great sign she’s a shoe in for the job. But markets were focussed on comments she made that the Fed’s unconventional monetary policy, QE, would continue for as long as was necessary.

Which means with hour and a half to go in trade the Dow is up 0.32% to 15,872, the Nasdaq is up 0.09% and the S&P 500 has made another new high and currently sits up 8 points to 1789

You just cant fight the Fed and its balance sheet it seems so the notion that stocks are probably too high might have some legs and the notion that stops should be dragged up on any longs is probably true to but for the moment the bulls are in control and as uncomfortable as that is it is the current reality.

The monthly and weekly charts look over cooked but a turtle style trader would just see this is a trade they have to take given the topside range break – and for the moment perhaps that is the right approach.

European growth data was out overnight and the prints were not very encouraging unless you are keen to see the ECB carry out its own version of Quantitative easing. EU wide GDP for Q3 printed -0.4% where -0.3% was expected. Germany hit expectations of growth of 0.3% in Q3. France missed printing -0.1% against expectations of +0.1%. In the UK retail sales unexpectedly fell 0.7% in October.

But weak data didn’t deter Europeans stock traders who continued the rally from Asia. The FTSE closed up 0.54%, the DAX rose 1.05% and the CAC was 1.04% higher. In Milan stocks fell 0.15% and in Spain stocks fell 0.35%.

Closer to home at 6.30 am AEDT the SPI 200 Futures contract on the Sydney Futures Exchange are down 1 point to 5362 bid.

The SPI 200 is still pointing down but also has support as you can see below.

So not overly bearish unless or until the trendline support gives way but that is currently unlikely given the macro back drop.

On FX Markets it was night of US dollar strength, or realistically European weakness feeding US strength with the Euro sitting at 1.3444 down 0.31% on the day and off the high just near 1.35. GBP surprising hasn’t really budged and sits at 1.6057 while the USD is stronger against the Yen up 0.86% at 100.07 and testing important trendline resistance – which shouldn’t hold on this attempt.

USDJPY in time will hit 110, 120 and eventually 150 but for the moment 100.11 is the key resistance as you can see.

100.60 is the next target and if that breaks USDJPY should gallop higher.

The Aussie dollar caught a few bears in a trap yesterday running up to a high of 0.9385 but it is back at 0.9310 now off 0.5% and looking wobbly into week’s end.

On commodity markets our friends who trade Bitcoin have been busy and the range in Asia yesterday was huge as it moved through 10% with a low of 402 and a high of 447. It sits at 426 now. Nymex crude was down 0.26% to $93.64 Bbl, Gold rallied 1.41% to $1289 but silver is still pressured falling 1.62% to $20.48 oz. Copper was unchanged at $3.16 lb. Corn fell 0.87% but wheat and soybeans were fairly quiet.

It’s a quiet end to the week with now big data prints to attract the attention of traders. Maybe EU CPI if its low might increase expectations of unconventional monetary policy from the ECB but the only other minor major piece of data is the Chinese FDI data today and the NY Empire Manufacturing Index in the US tonight.

Have a great day and good hunting

Greg

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