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 and unlimited Fed communication regarding low interest rates 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 1423; and the standard 200-dma support level at 1671. But perhaps more importantly, the distance above the 160-wma has regained the+28% level that denotes a potential “bubble-like rally” threshold. If it expands above +30%, then an upside explosion is under way.
WORLD MARKETS ARE ALL HIGHER THIS MORNING as they approach Wednesday’s Christmas holiday. The volumes today are rather meager, but they are to the upside as generally are seasonally strong during the last two weeks of the year. The perceived drivers of this morning’s strength stems from Friday’s late day revelation that the IMF will raise their growth forecasts for the US, which isn’t surprising given the strong 3Q GDP figures released. However, we’ll caution, the IMF isn’t the bastion of world economic forecasting, for they simply follow countries GDP readings and then extrapolate. Also driving the markets this morning is Apple’s (AAPL) deal with China Mobile to provide the iPhone to subscribers. This has “juiced” the technology sector stocks, and in particular AAP…which is higher in the pre-market by +3%.