S&P 1,450 and 1,460 are key today. We talk about the Dow because it’s easy to follow but the S&P is the index to watch for a break up or break down to guide our investments.
I’m pretty sure we’ll hold it as the ISM was our worst data point of the week. The ADP jobs report, as we expected, shows that people are still working, that’s half the battle with small business hiring offsetting declines (no surprise) in construction and finance.
Over in Asia, the Nikkei is still closed and the Hang Seng would have been better off staying closed with a 2.5% rule drop below 27,000, finishing the day down 673 at 26,887 very literally saved by the bell. Pakistan tested the 5% rule going the other way with a 643-point rise (4.82%), erasing 1/2 the loss since Bhutto’s assassination.
In Europe the DAX, which we have been watching for weeks as a leading indicator at the critical 8,000 level, is well below it this morning at 7,886 so let’s keep a close eye on them to confirm any positive move we may attempt. The other Euro bourses are more or less flat ahead of our open so it’s up to the USA to set the market tone today. Europe is suffering from poor retail numbers as well as a still-weak PMI gave investors pause.
I can’t see our markets celebrating $100 oil today so a "rally" may be short-lived with the inventory coming at 10:30. I think there is also a market fear of Obama in Iowa this evening as he has certainly not been business-friendly in recent speeches. Wall Street considers Hillary the lesser of 3 evils on the Democrat side so we may get a relief rally tomorrow if she pulls it out. Also, as we learned yesterday over at the member site, Thursday is our low of the week!
MON is giving us a nice lift today as earnings are up 200% from last year and they raised guidance for ’08. This justifies a lot of the gains in the Ag sector and Monsanto is poised for additional beats as Solutia is emerging from bankruptcy and may contribute significantly to the bottom line later in the year. While this should be enough to justify the $110 price level, I’m not sure it will get them past profit taking today as there are few surprises left down the road and, even with raised guidance, the p/e in the mid 30s is going to be hard to sustain.
We need to be light on our feet today and watch those levels. 10:30 is going to be more critical than usual but we’d love a nice run in the energy sector to short into as $100 oil is simply not sustainable as it’s already forcing the middle class to make sacrifices just to keep afloat.
The Yen hit 100 to the dollar in overnight trading and that threatens the carry trade which supports much of the global economy as gains in investments on low interest loans taken from Japanese banks are wiped out by currency fluctuations. Since carry traders tend to favor secure low-yield bonds and notes, we’ll watch for trouble to show up there first.
Let’s be very careful out there!
