Dow not moving just grooving-Wait and See

Quotes:
FTSE 5625
Dow 10657
USD 80.16
Crude 80.04
Gold 1113
GBP/USD 15100
EUR/USD 13690
Xstrata 1168


The Dow has continued to ebb higher with the generally positive market dynamic, as the Euro plans to put in measures to bail out Greece if required, and fears of contagion relating to sovereign debt calm. EUR/USD having rallied of 13500 has the potential to make it back to the 14000 provided the FED maintains its stance tomorrow of keeping rates low for an “extended period”. Given the potential problems in the market, and ongoing problem with the weakness of the Yuan, I think it is likely that they will maintain the same outlook.

Announcements by credit rating agencies that the UK and US were close to having their ratings cut did not trigger any significant sell off (bull market dynamic), with the market rallying into the close as Dodd’s financial regulation plans come in weaker than expected.

Miners have seen 3-4% correction as China continues to take a tough stance on preventing overheating and hyperinflation, suggesting further tightening. Oil rallied from 7930 today back into the $80 region as the market maintains its positive dynamic.
At the moment the miners seem to be hitting key resistance, a point to note would be that despite China’s efforts to slow down its economy, and prevent runaway inflation, it doesn’t necessarily mean it will be able to do so. Hence the demand for miners is likely to remain high, and so earnings are likely to be a key catalyst to maintain their rally.

Financials continue to rally with easing of Government debt fears, and tightening of sovereign spreads. Goldman Sachs having approached key resistance at $175,a break above this would suggest a high probability rally to the $190 region, pending the completed release of Dodd’s financial regulation reform. I also continue to be long RBS, with a tight stop. Longer term investors may consider a stop at 40p (in case of any unexpected news relating to downgrades of the UK government, or UK fiscal situation).

However we have reached significant resistance on the Dow, with the market unable to hold on to the 10700 region. Most likely the catalyst for a move beyond this would be Q1 earnings season, however any significant improvement in non farm pay rolls may provide the push through, turning 10700 into a key support level.
Right now the risk/reward ratio isn’t really there to go long, so the key is to wait, for a break to the upside past 10700, or another corrective phase.

Possible ratings cuts, and further pre election surveys pose further downside risk to GBP/USD making it difficult to forecast, however, from a purely technical perspective any large daily move up to 15200/15300 would be seen as potential for a rally back to 16000.

Oil having met key resistance once again in the $82 region, crude looks set to continue to range, between 78-82 (in absence of any bearish news that could trigger a further correction to the lower 70’s region).

In my opinion the underlying conditions of the economy, in relation to consumer spending, availability of consumer credit, unemployment, and the American housing market, continue to remain weak. However with quantitative easing set to continue opaquely via Fannie Mae and Freddie Mac, there is a good chance of an ongoing liquidity driven rally (once the Dow is able to break above 10700).