U.S. Markets Go Higher, Nikkei Above 16,000

U.S. markets broke losing streaks as the rose higher overnight. Investors are looking, optimistically, towards the jobs report due out on Friday. Also corporate fourth quarter earnings helped sentiment.

It is really interesting how the day went. There was not a lot of news to move the markets. European markets were happy that inflation data came in lower than expected. This is increasing fears of deflation in the Eurozone and will force the European Central Bank (ECB) to announce new stimulus measures at this week’s policy meeting.

The way the markets moved, could indicated the level of bullish sentiment traders have meaning the last few days were simply a correction and we could be in for another rally. There is no good way to explain yesterday’s rally.

STOCKS

The Dow Jones jumped up 105.84 points to finish the day at 16,530.94. The S&P 500 ended a three day skid to close up a marginal 11 points to 1,837.88. Healthcare and technology led the sectors higher. Materials was the laggard on the S&P for the day.

The Nasdaq Composite rose nearly 40 points, a one percent gain, to close at 4,158.18. Neurocrine Biosciences (NASDAQ: NBIX) surged 90 percent on news one of its drugs, in the experimental stage, helped treat symptoms of involuntary spasms.

Volume wise, we saw 699 million shares traded on the Dow Jones and composite volume hit 3.5 billion. We should also mentioned the U.S. Dollar continued to strengthen against its major pairs as the Treasury’s 10 year rate fell to 2.945 percent.

The Nikkei is seeing a bit of a recovery this morning as it is trading back above 16,000 again. This is the first time it is back above that key level for 2014 and is ready to break a two day skid lower. Investors are happy with a weakening yen, USD/JPY is moving back to 105, which is boosting exporters. On mainland China, the Shanghai has erased earlier gains to slip 0.4 percent. We are nearing Monday’s five month low point as commodity driven stocks are falling.

The Australian benchmark is also down, marginally, and near a two week low. Total job vacancies fell 1.7 percent in Q3 2013. This is indicating weakness in their labor market. The Kospi, in South Korea, is flat after two days of gains. Investors are cautious ahead of its central bank meeting this week. They are expected to stick pat with policy and rates.

CURRENCIES

USD/JPY (104.953) the yen is falling as we are approaching 105 again. Note how we are riding that short term trend line. The support at 104 is holding and keeping the rally going. We are targeting 109 still and see weakness only on a fall below 103.50. Short term resistance lines up at 105 and at 105.50.

EUR/USD (1.3633) is bouncing back from the support at 1.3570. As long as we remain below the resistance zone at 1.3650/90 the sellers will keep pressure up. A break below 1.3570 brings the bears out in force to 1.35. A move above 1.3730 relieves selling pressure.

GBP/USD (1.6417) saw selling pressure near 1.66 and fell. We then saw some buying at 1.63 and recovered a bit. While above 1.62 we could see rallies to 1.6750. Need to break above 1.6458 first before fears of a dip can be reduced.

COMMODITIES

Gold (1226.70) has face serious selling pressure while under 1245 and as the dollar has strengthened. While above 1225 we could bounce back to 1250 in the coming session. If 1245 holds then we can be range bound from 1225 to 1245 for some time. Only a break above 1245/50 brings buyers into the market.

Silver (19.725) has fallen. We are testing support at its current level and then see support at 19.50. If that holds we can recover to 20.

Copper (3.368) is trading nice and steady. We are moving between 3.35 and 3.4 for now. While above 3.35 we remain strong.

TODAY’S OUTLOOK

Today is a very quiet data day. Both the bank of England and the European Central bank are set to start their policy meetings. We expect no changes, but could get more stimulus from the ECB. Will wait and see.