Visa and MasterCard Deserve Some Credit
Consider long positions with these staples in domestic economy.
Stocks were down about 1.25% yesterday on big volume as the US dollar carry trade unwound further. There was something in the news for everyone Thursday: concerns about credit ratings in Greece, Spain, and UK; US leading economic indicators rose 0.9%; a disappointing forecast from FedEx (FDX). Markets were decidedly negative from the start and never attempted to rally, closing at the low of the session on volume nearly 50% above average. The S&P is back in the middle of its trading range.
Bonds were the beneficiary of a rotation of risk assets; the buying pushed the 10-year Treasury yield below short-term support, but well within its recent trading range.
Commodities fell more than 1.5% as a group as gold and the agricultural commodities weighed heavily; oil actually bucked the trend by treading water Thursday. Gold closed right at its uptrend line, a good entry point for new longs.
The US Dollar Index ripped higher Thursday -- conquering short-term resistance at 77.47 -- as the dollar shorts continued to frantically cover their positions and as global money flowed into the "safe" currencies (dollar and yen).
Overnight and early morning: Asian markets were mostly lower overnight in reaction to the weakness in the US yesterday; meanwhile European markets are bucking that trend and trading uniformly higher so far this morning. S&P futures are indicating a stronger open for US equities. The US Dollar Index is trading very slightly lower early this morning. Oil is very strong this morning while gold tries to get on solid footing once again.
(Figures are rounded)
Critical Market Components:
S&P 500: support for the S&P is at its ascending 75-day moving average (currently at 1073.85); resistance remains at 1139, which is a convergence of Fibonacci levels; the market remains in a trading range and is likely to stay in this range until the beginning of the new year.
NASDAQ: the critical level on a weekly closing basis is 2211.95; the NASDAQ traded below both that level as well as a secondary support provided by the lower edge of a rising wedge pattern at 2188.40 yesterday; the next significant support level is 2150; the NASDAQ will likely get a boost at today's open by good earnings reports last night from Research in Motion (RIMM) and Oracle (ORCL).
Dow Jones Industrials: yesterday, the Dow approached support at the rising trend line at around 10,304; resistance for the Dow on a weekly closing basis is 10,507.59; next target is 9,712 on the downside on any break of support; as mentioned above, equities will get a boost this morning -- at least in technology; let's see if it holds up going into the weekend.
10-Year US Treasury Yield: bonds rallied yesterday pushing yields down through short-term support; the next serious support level is further down at 3.382%; first resistance will be at 3.617% while our intermediate-term target remains in the 3.78% to 3.88% range -- the wave iii of 5 yield projection.
Commodity ETF (DBC): support at the 80-day moving average at 23.31; substantial resistance at 25; commodities fell hard Thursday as the dollar shot higher -- with the notable exception being the resilient crude oil market; gold came all the way down to its uptrend line and is now at a favorable level for new long positions after testing $1,100 per ounce.
US Dollar Index (DXY): the DXY blew through resistance at 77.47 yesterday and is holding above that level so far this morning even as it pulls back; short-term support is at previous resistance of 77.47 with 76.58 the next support level below that; the next short-term upside resistance will be at 78 while our the intermediate-term target is the 80 to 81 area.
Semiconductor Index (SOX): the 339 level (which is where the SOX closed Thursday) will be key going into the weekend; support below that exists at the weekly uptrend line at around 320; a breakout above the 339 weekly resistance would lead to an upside target of 379 to 385.
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