FX Futures Edge: World Markets Tentatively Higher
Richard Rhodes | Jun 12, 2013 03:06AM ET
STOCKS:
The world economy is weakening: the U.S. payroll tax increase and “sequestration” are pressurizing the U.S. economy. China is being pressurized by Japan, and has “dampened” their housing market. However, the eurozone is seriously contemplating loosening up their austerity plans. Although we feel that risk is being mispriced at current levels given recent pressure upon world economic figures and the developing pressure upon corporate margins/ earnings - consensus is that the world’s central banks will save the day.
STRATEGY: The S&P 500 remains above the 160-wma long-term support level at 1323; and the standard 200-dma support level at 1497. But perhaps more importantly, the distance above the 160-wma has grown to +23%, which now means that a “bubble-like” rally is developing. We can see sharp gains such as 1986-1987 and 1995-2000.
World Markets Are Tentatively Higher, although one gets the sense that this strength could be fleeting. Quite simply, the gains are rather jagged, and may reverse at the drop of a German constitutional court hat, given the second day of testimony on Wednesday regarding the constitutionality of the ECB open market transactions or bond-buying. This is the risk for Wednesday; and is compounded by emerging market jitters related to Turkey, Greece and Egypt. In Turkey, the protests continue unabated, and one gets the sense this isn’t what the Eurozone wants to see at this juncture. Greece was downgraded by MSCI from a developed market to an emerging market; and MSCI told the world that it would be very difficult for investors to extract their capital from Egypt. This is all giving market par ticipants “pause” after the largest run-up in stock prices since November-2012.
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