Futures got a boost overnight as ES climed as high as 1302.50. This is 12.5 points higher than Friday's close, which was already on the heels of a 17 point rally.
The chief catalyst for this bullish action is China. Chinese 4th Quarter GDP rose to 8.9%, surpassing expectations of 8.6%-8.7%. This is still a decline from the 4th Quarter one year ago, but it is less of a decline than expected and the market has responded well to that. Clearly concerns over a slowing China are much more significant than the S&P downgrade of France, Italy, Spain and yesterday's S&P downgrade of the EFSF rating to AA+ from AAA. The poor health of the Eurozone countries as well as the poorly conceived stabilization mechanisms designed to bail them out are already priced into the market.
The Euro saw a significant rally following the China GDP numbers as did European equity markets. This just goes to show how important the health of the Chinese economy is to the Western world.
As for my bearish sentiment; We have now pierced the top of my key resistance zone at 1300 ES. This does not mean the bearish case is over yet, but I am turning neutral in the short-term until the market shows its hand further. I still like selling rallies for short-term profits, but we will have to wait and see if there is potential for any sustained downside action.
Levels to watch today on the ES:
Resistance above at 1302-1304
Support below at 1292-1293, 1287-1289
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