Markets saw some selling yesterday. Some contributors to the negativity? Rumors that today's EU summit would be canceled or postponed? Very low consumer confidence rating in the US? Ultimately it was just corrective action following a nice run-up in price. The ES didn't quite get to my 1258 target (3.5 points shy) and the fact that the move above 1237-1240 did not confirm with a consecutive higher close, suggests we may see a little bit more selling before continuing higher.
Overall I continue to be biased to the upside as I think the downside potential is limited. There is pretty good support currently in the low 1220s ES. If that breaks down we could see a move to 1210 and potentially as low as 1200, but that is a price level I will look for long opportunities.
In reality though, these levels don't mean too much as the catalyst to market action will be driven by information coming out of the EU summit later today. Look for headlines to break at or after 1:00pm EST. It is still too soon for any substantial plan to be finalized, so the key will really be to see how much cooperation and agreement there is between Eurozone financial leaders and the level of optimism at reaching a solution.
I'm on the fence right now as to how optimistic the headlines today will be. I think there is a chance that contentious viewpoints may result in more market uncertainty. Ultimately a solution will be reached, I just don't know how close they will be to that solution after today's meeting.
My overall bias continues to be bullish. I think a move down into the 1200-1210 range on the ES would be a nice buying opportunity. Looking ahead, I see a potential topping point around 1270-1275 ES where I will begin to consider short positions. We'll see how things play out.
Just want to mention the surge in the price of Gold yesterday. This is very bullish for the yellow currency metal as it closed above 1700 and above key resistance at 1688. This bullish action in Gold may be speculation that the ECB will print Euros to help fund the EFSF bailout fund. In any case, support will now have to hold in the 1680s before Gold can continue higher.
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EU Summit:
ReplyDeleteWatch the European Council Meeting live here
The draft EU statement has confirmed a few things, but left many details until later dates. The factors that were confirmed were widely anticipated as well, including the following:
ReplyDelete-The risk insurance and SPV dual leverage model will be put into place.
-The bailout will be leveraged 'several fold'.
-Further enhancements to EFSF are possible with cooperation from IMF.
The things left hanging include:
-Italy's economic plans (to be presented 11/15 now)
-The magnitude of Greek debt haircuts
-Bank recap plans (which can't be finalized until Greek haircuts are agreed to)
-Amount of EFSF leverage (rumored to be around 4x a 250-275 bln euro base)
-from briefing.com