Reports state that the International Monetary Fund is preparing a 600 billion euro ($799 billion) loan for Italy in case its debt burden worsens as a result of Bond yields continuing higher. This has put a bid under world markets. S&P 500 futures have been up over 2% so far in overnight trading.
I stated in my previous two posts that 1150 would hold as support on the ES and so far it looks like that is going to be the case. If you didn't get long on Friday, I don't know if it is the best idea to chase the market now. Waiting to buy a dip is the smart play. There is a chance that we see this morning's gap get filled down at 1153. However, there are no guarantees we will get another buying opportunity like that in the near-term and if it does happen, it will likely be on some sort of negative news.
My bias is to the upside and I believe the bottom is likely in for 2011. However, if reports refute the IMF loan to Italy, we could see more selling enter the market. Otherwise I will be looking to buy dips for the remainder of 2011.
We must keep in mind that the IMF Loan to Italy is not a sure thing. Lets not forget that a short while ago, political leaders in Europe said the EFSF would be leveraged to One Trillion Euros to safeguard against countries that might be at risk of defaulting on debt obligations. It later became obvious that there was nobody actually willing to provide this leverage to the EFSF. So while we may see some buying come in here on rumors again, that doesn't mean the trend is going to remain up.
First target is 1198-1200 ES.
Second target is 1218-1220 ES.
1152 remains a key level. My bias remains bullish as long as the ES does not see a daily close below 1152.
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The rumor that the IMF would loan 600 billion Euros to Italy was proven to be just that, a rumor. The markets do not seem to care though as they continue higher. ES is currently up over 3%
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