Asian markets were strong overnight. India reported its best manufacturing reading in six months. Europe's markets are also strong this morning, with another meeting scheduled for Merkel and Sarkozy.
The euro is up and the dollar is lower, helping to boost commodities. Gold prices are rallying back up to nearly $1600 (+2%). And oil prices are up even more ($102.55) amid threats from Iran regarding Hormuz and blocking shipping lanes.
In the U.S., the December ISM Manufacturing index rose to 53.9 from 52.7 last month. But the market was already nicely higher before this data came out. Recent economic data has been strong, and I wouldn't be surprised to see upward revisions to Q4 GDP estimates soon.
The 10-year yield is also rallying up to 1.96%, but still below the 2.0% level that has been resistance of late. As for the VIX, it is down +3.5% so far near the 22.50 level. It will be interesting to see if the recent trend towards lower volatility persists, or if rhetoric out of Europe heats up again and drives volatility higher like in 2011.
Trading comment: The SPX is staging a strong breakout this morning. As you can see from the chart below, the SPX has been consolidating right at its 200-day moving average for the last 5 days. Today, it is spiking higher and putting some distance between what should now be support at that key moving average. This is a bullish sign and should lead to more short-covering if it holds into the close. As earnings season approaches, I also hope that we don't get any big preannouncements to the downside. We have already heard about some disappointments in the semi space, so reports related to those companies should be discounted already.
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