STOCK AND COMMODITY MARKETS ARE “MIXED” as the EU Summit has produced various positive and negative headlines through the night. First, it has produced a regime where all 17 Eurozone countries and 6-others that “aspire” to join the group resolved to negotiate a new agreement alongside the EU treaty with tougher deficit and debt regimes…ostensibly to insulate the Eurozone against a further deterioration of its bond markets. Second, the markets seem rather skittish given they are unsure of the ECB’s role in all of this mess given yesterday’s dramatic decline based on comments from ECB President Draghi regarding the bank’s future role. Quite simply, the markets want an “activist” ECB, and ultimately there shall be one…it’s only a question of “when” and not “if.” Lastly, we should note that the Euro is stronger this morning, and if there is anything positive to report on the Eurozone currency is that it is unchanged from where it stood on November 16th.
To us, it is apparent that the Euro has discounted a great deal of bad news thus far in the short-term, which should lead to a rally above the 1.35 level…which then would target 1.39. This would be positive for “risk assets” in general, and we would therefore look for a broad Santa Claus rally into year-end.
Outside of this this morning, we have the University of Michigan “Wolverine” Consumer Sentiment report, which is the preliminary report for December. November’s final reports showed a reading of 64, with the consensus-makers telling us to expect a reading of 65. However, we should point out that the Rasmussen index continues to rise since November, which correctly forecasted a higher-than-expected reading…coming in at 67r. This has shown to be both stock positive, but not necessarily commodity positive as the Euro has come off its high just a bit…with commodities following.
Therefore, we want to be long both stock and commodity futures, but we are going to wait through the weekend before reassessing Monday’s early overnight trade. Then, we’ll expect to act – most likely moving towards a long S&P futures position first and foremost given our confidence in the trade as the precious metals are only modestly higher, while both the energy and grains are lower today.
For a full report, see attached pdf.
To us, it is apparent that the Euro has discounted a great deal of bad news thus far in the short-term, which should lead to a rally above the 1.35 level…which then would target 1.39. This would be positive for “risk assets” in general, and we would therefore look for a broad Santa Claus rally into year-end.
Outside of this this morning, we have the University of Michigan “Wolverine” Consumer Sentiment report, which is the preliminary report for December. November’s final reports showed a reading of 64, with the consensus-makers telling us to expect a reading of 65. However, we should point out that the Rasmussen index continues to rise since November, which correctly forecasted a higher-than-expected reading…coming in at 67r. This has shown to be both stock positive, but not necessarily commodity positive as the Euro has come off its high just a bit…with commodities following.
Therefore, we want to be long both stock and commodity futures, but we are going to wait through the weekend before reassessing Monday’s early overnight trade. Then, we’ll expect to act – most likely moving towards a long S&P futures position first and foremost given our confidence in the trade as the precious metals are only modestly higher, while both the energy and grains are lower today.
For a full report, see attached pdf.