Having broken the 11000 barrier last week the Dow still looks technically strong. Despite confusion over the Greece deficit and bail out situation on Friday, the Greece government bonds spreads have reduced back below the 450 bpt mark as news is released of another proposed $61 billion promise from the eurozone and IMF combined, in order to avoid a potential future default.Market volatility today was at a 2yr low.
Quotes:
Dow 11,000
FTSE 5772
USD 80.57
Gold 1156.70
Crude Oil 8432
EUR/USD 13590
GBP/USD 15370
Xstrata 1283
Underlying conditions? Housing, consumer credit, still weak. Meredith Whitney estimating that banks and lenders willl cut $2.7 trillion in outstanding credit lines by 2011.
However the market is technically strong. Liquidity driven bull market continues. Potential obstacles would be further default scares from Portugal, Spain, UK, however with Q1 earnings season approaching I think it is likely that earnings outperformance will be able to counter any bearish news from possible downgrades in credit ratings of P.I.G.S..
Greek bond auctions tomorrow should set the tone, for whether the market has faith in the new proposal, and a furtehr tightening of greek bond yields should aid the market in maintaining its bullish dynamic.
Commodity stocks have seen a slight pause in their rally with the dollar also having weakened, from its previous 82 zone. A good opening tomorrow, be indicative of a high probability play for them to continue to previous highs (e.g. Rio Tinto currently at 39.46, high of 41.04)
Strategy:
Long Dow, Stop at 10880. Buy any corrections below 11000.
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