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FX Futures: European Shares Hit Two-Month Lows Amid Taper Concers

Published 12/12/2013, 02:27 AM
Updated 07/09/2023, 06:31 AM
US2000
-2.94%
SMLL
-0.20%

STOCKS: The world economy is has begun to heal if we look at the PMI figures across the world. However, there remain clear headwinds to the continuation of this healing, like potentially higher interest rates. Quite clearly, we feel risk is being mispriced at current levels given the economic backdrop and developing pressure upon corporate revenues/margins/ earnings. But, the QE pillars continue to hold prices higher than would be seen in non-QE times.

STRATEGY: The S&P 500 remains above the 160-wma long-term support level at 1415; and the standard 200-dma support level at 1652. But perhaps more importantly, the distance above the 160-wma has regained the+27% level that denotes a “bubble-like rally” threshold. If it expands towards 30%, then an upside explosion may be under way.

Russell 2000 Small Cap Index Chart
WORLD MARKETS ARE LOWER ACROSS THE BOARD, with European shares hitting two-month lows as concerns start to develop that the Fed shall taper, and whether that taper takes place in December, January or March, it isn’t important. The Fed is on the cusp of pulling back their bond-buying campaign as economic data has been better-than-anticipated, although we could poke several holes in that statement, but on balance certainly better, and the Congress has decided to come up with a budget agreement for the next 21-months. This latter point removes one more impediment to the uncertainty for businesses surrounding the economy. So, the prospect of stronger US growth means that corporate profits shall falter as margins are squeezed as capital is deployed to support that growth.

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