Ahead of the open, (04-01)
Wednesday, January 4, 2012 at 08:19AM As in recent years, Global markets flew out of the gate upon re-opening in the New Year. In fact, U.S markets only followed what was a concerted effort by Global markets already underway for 1 or 2 session depending on the region.(Germany up 5% now, Brazil, India >3-4%. Note, China overnight has started where it left off in ’11 as speculated rate cut didn’t happen.
On many days, market players evaluate newsflows and come up with excuses to understand a big move upwards or downwards. This worldwide melt up has only one main catalyst and that is the better than expected PMI data as laid out here before open. Overall, the markets were impressed and also just happy that ‘Europe’ was quiet on the sovereign issues allowing it to break through the high SP1260’s cluster of resistance. There is not much out of this region (like ‘weak’ peripheral countries auctions) this week allowing things to be quiet (unless S&P breaks silence) and attention swayed elsewhere. This week will continue to be dominated by economic data and may bring late October highs ~1285 into play.
Although, US markets finished off highs, the gains were solid and nothing negative can be taken away. Even a positive FOMC minutes hinting at further actions (QE3), if a communications shift (transparency on interest rate policy)) was coming wasn’t enough for closing highs today, but that may change after further evaluation by the market in the upcoming days. Some of the reasons to like the tape action is the breath. The number of new highs was positive as was the bid for higher beta sectors (materials/commodities Oil/financials.
The largest trailers of ’11 (SP 500 stocks) were the ones getting the best bid. The question is how much of this high beta action was fast traders vs. real longs stepping up to the plate? Sometimes buying the weakest trailers like March ’09 is a sign of a long bullish cycle, but it’s a different theme now into ’12. Simply, it may last a little longer, but eventually real longs only will have to come in and spread the wealth for this to be viable for an extended time. Consumer discretionary/retail late weakness is a little ominous (maybe only due to hesitation before Thursday’ same store #’s’). Anyways something you’d like to reverse in one of the strongest groups last year.
In all, quite a bullish day for the short term.