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New all-time highs have been seen on the S&P 500 and the Russell (US small cap index), while the Dow is 2.6% away from its all-time high of 15709. The index is now eyeing near-term resistance at 15,331 (the 61.8% retracement of the 15709 to 14719 sell-off). It seems we are very close to hearing an agreement in the Senate, which would re-open the government until January 15, while the debt ceiling would be increased until February 7, although this date seems to be moving around (I originally read February 15). We should hear more today, but it really feels to me like US equities want to go higher from here.
At 11:30 we get the RBA minutes and traders will be keen to see if the bank goes into more depth around the strength of the AUD, where it downgraded its level of concern in the post meeting statement on October 1. We stand neutral on rates from here and feel the RBA is finely balanced in its rhetoric, giving no bias to ease or hike into the future. On the daily chart key resistance is seen between 0.9510 and 0.9514 (the 38.2% retracement of the year’s high to low and top band of the Bollinger bands).
After trading to a low of $1260 yesterday, gold found good buying activity. Talk that a deal in Washington to bring the government back to work and extend the debt ceiling is of course aiding the downside pressure. The lower band of the Bollinger bands comes in at $1269, so perhaps a further bounce is due; however in a down-trending market, you will tend to see the asset hug the lower band, and thus I like to sell rallies in the metal. Stops could be placed above the recent downtrend resistance at $1325.
I have been looking at long positions in JP Morgan of late and continue to like this for a move to $54.00. Citigroup reports quarterly earnings tonight, along with the likes of Coca-Cola, Intel, Yahoo and Johnson and Johnson. Analysts expect EPS (adjusted) of $1.04 on revenue of $18.71 billion. I’d expect to see lower trading revenue, while fees in its capital market division are likely to be fairly flat. All-in-all Citigroup does have a good pedigree at earnings time, rising four of the last five earnings reports.
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