Key News
*Stocks Rise Worldwide, Pushing S&P 500 to Best Month Since 1991 (Bloomberg)
* Trichet Calls for Silence as ECB Council Bickers Over New Tools (Bloomberg)
*Chrysler Will File for Bankruptcy, Official Says (Update2) (Bloomberg)
*Bank of Japan slashes forecasts (Financial Times)
The Event Agenda
The Morning Run-Down
Yesterday’s joy-ride in risk assets continued the paradox of data versus optimism. GDP numbers were the worst cumulative annual rate since 1957, yet the market looked past poor components and found a reduction in inventories to grasp onto. With strong rallies in stocks, commodities and currencies (against the dollar and the yen) some key technical levels were challenged going into the Fed announcement. The risk bulls were looking for some indication out of the Fed that it was seeing signs of hope and an inference that the worse was behind us. The Fed did not deliver. Instead, its pragmatic assessment of the economy was one with no surprises. Stocks however made a run at stops above the highs before settling off the highs of the day.
And the currency market’s response following the Fed was a knee-jerk spike in the dollar. Now, with yesterday’s activity behind us there are some interest chart points to watch.
Charts and Data of Interest
Yesterday’s aggressive rally in risk assets pushed the AUD/USD through its 200-day moving average. If the rally in risk assets continues further, next significant resistance comes in at 0.7561, the 61.8% retracement of the September highs to the October lows. Currency participants will continue to look to stocks as the gauge for risk appetite.
In the next chart, the S&P 500 traded into the highs yesterday from the post Obama inauguration rally (circled in yellow)…the six day spurt that took the S&Ps up to 877 before subsequently staging a decline to new lows at 666. This level held going into the Fed announcement, but broke above as stops were run later in the day. Today’s activity should be interesting for the near future in this bear market rally. A strong close today would mean major resistance in the 940-960 area is the next target. A weak close would mean a potential blow-off top for stocks and risk assets alike.
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