STOCKS:
The European debt contagion has been “kicked down the road” as Spanish and Italian short-and-long term bond yields have moderated recently given the ECB “plan” to buy bonds of up to 3-years in maturity...but only if asked; and only if conditionality is imposed upon those asking. The Fed has also changed its game from “inflation-fighting” to “unemployment fighting;” and with any war — they will go further and farther than anyone believes in printing money to achieve their ends. This will support all asset prices ultimately.
STRATEGY: The S&P 500 remains above the 160-wma long-term support level at 1233. The much followed 200-dma support level stands at 1360, and remains the bulls “Maginot Line.” We’ve noted this is perhaps one of the “weirdest rallies” we’ve ever been witness to, and it causes us a great deal of consternation. But the new Fed policydirectly targets stocks; expect a near S&P all-time high test at 1515-to-1530.
WORLD STOCK MARKETS ARE “MIXED” AS THE NEW FLOW REALLY HASN’T CHANGED for all intents and purposes. We all understand that European economic figures are showing weakness; and getting weaker. We all understand that China is also weakening; but they are on the Golden Week Holiday.
We all understand that Spain shall not ask for a bailout right now as the Galicia elections are only 3-weeks away; but they may do so before then if a consensus is arrived at between the political parties. There is very little “new” to report this morning; but be that as it may – the world’s equity markets are trading in what many would call a sideways pattern, which generally is a continuation pattern of the prevailing uptrend.
Our propensity to trade borders on “nil” outside of the positions we currently have on. However, yesterday’s poor earn ings showing by Mosaic (MOS) hurt our Potash (POT) position, with POT being downgraded today. This is the “risk” currently in the markets – “earnings.” Therefore, we shall move quickly to exit POT this morning; and while doing so – we shall replace it with another long position in Brazil’s ETF (EWZ).
This allows us to hold a modestly long position as their current “weird trading period” works itself out – which we believe, will resolve itself higher for a brief time. Our upside target for the S&P 500 is 1515-to1530 – and we suspect we arrive at this zone in the next few weeks.
To Read the Entire Report Please Click on the pdf File Below.