News Driver: Bank of Japan cuts interest rates, ECB inflation inline and US GDP not as bad as expected.
Into today’s open Bank of Japan Kuroda is creating risk-on (temporarily) by going NIRP (negative interest rates -0.1% on excess bank reserves), ECB Inflation metrics printing Goldilocks (Core +1% vs forecast +0.9%), and Q4 2015GDP for the US slightly missing forecast (better than market was expecting) +0.7% vs forecast of +0.8%
Here’s a shot of the S&P 500 eMini futures
Our bias remains the same.
MID-LONG TERM (Weeks-To-3Months+): Bearish
If the S&P 500 breaks back below 1,880-1,870 (a key support floor), and if the Crude Oil (WTI) reverses back below $30 aggressively. This market has more downside risks than upside potential in the mid-to-longer-term. Look to De-risk long positions with rallies unless you can stomach the volatility.
SHORT TERM (Days-To-Weeks): Bullish
Entering this week higher risk long side positions were on play with the deeply oversold technical bounce that started January 20th, 2016. S&P 500 (SPY), Nasdaq (QQQ), Russell 2K (IWM), Int’l Developed (EFA), Emerging Markets (EEM) and TSX (XIC).
We remain in HOLD mode on these positions into the open, looking for a momentum break above 1,928-1,921 on the S&P 500.
S&P 500: We see the S&P 500 opening up printing a small bodied green candle holding above 1,880-1,870; with better odds of closing the week indecisively, still above aforementioned support. The odds that Crude Oil weakens throughout the day are good which would be one of the key causals keeping the S&P 500 from lifting off and continuing the technical bounce we bought into on January 20th, 2016.
TSX: would be to out-perform the S&P 500 as Crude is positive into the open along with a weak-form risk-on tone to equities; de-risking from short-term bounce plays you may have acquired on Jan 20th would make sense as the TSX approaches resistance of 12,810-12,755.
Bonds/Gold: Gold is flat (-0.15%) and in swing high formation, along with being dislocated and relatively expensive; like most of the defensive asset classes out there. Long-Term US Bonds are getting a bid today (+0.75%), which typically implies a defensive posture into the open
Oil: $33.75 8:57am: WTI has some major resistance at $34.00-$34.80. If it stalls again at this level the bounce will likely fizzle out.
Economic Calendar: 8:30am US Fourth quarter GDP came out and was pretty much inline at 0.7% versus the 0.8% forecast. Canada also released 4th quarter GDP and it was inline 0.3%. The markets have taken the news in stride and have slowly moved higher. For a review of the rest of today’s economic data visit the economic calendar here.
Earnings: Another huge earnings day. Amazon AMZN, Colgate CL and Mastercard MA are a few of the big ones to watch.
For a complete list of today’s earnings visit the earnings page on our site.
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