The bears took a beating yesterday with the mini Tepper Rally. Good news continues to be good news and bad news is good news, since more stimulus would be expected, so the rally continues. Eurozone GDP's are weaker than expected across the pond. France now slips into recession. There is no growth in Europe since September 2011 almost two years ago. Germany's GDP disappoints and it is expected to lead Europe moving forward. However, bad news is good news and the European indexes are flat to up. DAX is 8348 continuing to punch out new highs. Japan's Nikkei moves above 15K overnight. Dollar/yen continues to print new highs now at 102.73 (weaker yen). The S&P futures were down 3 or 4 when the dollar/yen was at 102.40 a couple hours ago. As the yen weakens, dollar/yen moves higher, and futures recover to the flat line. The central bankers control the markets.
Copper is weak thus far today but weakness in commodities has no affect on equities. This is very surprising as evidenced by last evening's chart where commodities and the broad indexes typically move in lock-step. This divergence started in February. One or the other will have to capitulate. Copper and commodities will have to explode higher and run upwards to verify the higher equity prices, or, equities will roll over to absorb the commodity weakness. Considering the slowdown in Aisa, China, now Malaysia this morning, as well as Europe's funk remaining, pressure should remain on commodities. There are many interesting market cross currents now. The dollar is starting to break out higher with the two-leg bull flag pattern that would target 86. The dollar will only add pressure to commodities. The euro/dollar now at 1.29 needs to move lower to help Europe climb out of the doldrums so that would be in sync with higher dollar and lower commodities. The oddity is that equities are not moving with commodities for the last couple months or more.
The spike in Japan JGB bond yields is another drama. BOJ is buying 70% of issuance which should at least maintain flat yields but instead the yields are sky rocketing higher. Volatility remains key moving forward. The VIX came up to kiss the 13.20 level yesterday but fell on its sword opening the door to the market push higher in the afternoon. The market bulls continue driving the bus if VIX stays under 13.20. If VIX moves above 13.20, the bears will growl. Keybot the Quant remains long but if the VIX moves above 13.20, and the SPX drops under 1634, the algo will likely flip short. For the SPX today, starting at 1650, the bulls only need one single point, to punch up through 1651, to accelerate another upside move. The bears need to retrace yesterdays big up move and push under 1634 to regain their momentum. A move through 1635-1650 is sideways action. SPX support is 1645, 1634-1636, 1626, 1618, 1614 and 1597-1598.
Global bellwether DE earnings just hit beating estimates but cutting sales forward blaming currency fluctuations. Deere says weak economic conditions causes a tempering of forecasts and decreases equipment sales projections made only a couple months ago. Copper weakens. Empire State Manufacturing data and PPI are released at 8:30 AM. TIC data 9 AM. Industrial Production 9:15 AM. Housing Market Index and E-Commerce Retail Sales data at 10 AM. Oil Inventories 10:30 AM. M earnings are of interest today ahead of other retail earnings tomorrow including WMT, JWN and KSS. Housing Starts tomorrow morning is the key economic data release for the week.
Note Added 8:20 AM: M earnings beat on EPS but flat on top line like most other companies. A dividend increase is announced, buy-back and guidance remains positive so it is up one percent pre-market. The great American consumer is remarkable. M likely continuing to benefit from customers leaving JCP. DE now -3.5%.
Note Added 8:51 AM: PPI is in line but Empire State Mfg Index is weak. The weak manufacturing sector jives with the lower commodity demand, but, bad news is good news for markets. Crude oil now down towards 93. Brent oil is under 102. US Dollar is 84-ish continuing to hint at a breakout for the bull flag pattern.