There has been fairly good interest surrounding the Indian election and the near-term improvement in sentiments regarding China’s markets. It is still vital to consider whether there has been a low in the USD and how much higher developed market equities can be traded from there.
The price action on the S&P 500 last week was downright bullish with gains of 86 % worth of stocks with sentiment extending on dime towards the social media names and the internet. The U.S. benchmark has taken out much resistance at 1884 to 1885 and clearly the next stop is a daily close above the precious all-time high of 1897.
Shorting will most likely be prevented since there is an occasional 1 % rally in the S&P with a sturdy outperformance in the small caps and the subsequent fall in equities straight thereafter. Pullbacks will also be likely to be bought, especially when the VIX is at 12.2 % and improved selling in the long end of the U.S. bond market.
U.S. futures have thrust up on a rough day and are at an all-time high, whereas if the cash market was to open now, the S&P would be following suit along with a new all-time high respectively. Its rather a different story in Europe, markets opened on a firmer footing and the bulls will be looking for precious highs in the aforementioned markets. The FTSE appears to be setting tests regarding the year’s double top at 6867 and the all-time high print at 6950 which will be the markets subsequent objective.
The DAX and CAC also appear to be testing all-time highs as well and could possibly require a bit of a nudge following the open and quite possibly that comes in the nature of strong U.S. retail sales report. It seems however that the diversity of central bank policy, advanced trend in developed market expansion and low volatility resulted in traders looking at equities as the asset class of selection.
Focusing on the narrow budget
Asia has indeed provided with a strong back bone to the European open and has kept U.S. futures in an elevated position. In Australia, the talking point is surrounded on the budget which is due in the early European trade. Some of the information has been disclosed and the market had done a fairly good job in pricing the possible fiscal drag.
But from a technical point of view, it makes real sense for the Abbott administration to front load as much of the tightening as they can coupled with the idea to look better easing policy into the approaching 2016 election.
With the market priced in which the RBA will be leaving with rates on temporary hold for the remaining year, there is definitely a need to see something fairly significant to change these predictions. Also, it would make sense that there is the big possibility of seeing measures that would lead to a strong market negative.
With bids from PanAust’s largest shareholder which gave investors a get-out-of-gaol card following a 30 % drop into the final month of the first quarter for those who purchased their stocks during the same. As expected, the corollary have been felt is several other mid cap stocks with the materials space the sector to be controlled appears to be the most logical move at present.
USD/JPY appearing more beneficial
Japan had experience far better days and although this has been down to much better selling of the JPY, the USD/JPY has stood strong and has seen signs of buyers coming into the pair on any moves to 101.20 to 101.40 . Currently, the U.S. yields crept higher once again and there has been a good two-way business in this pair of late with 76 % of all open positions specifically from IG clients longer at the time of the report’s release.
There might possibly be no way of knowing the full extent of the results of the voting in India until the outcome of the election is determined, yet the fact that the NIFTY has rallied further up 1 % to a new high while the USD/INR has been traded to its lowest level since last year, indicates that the market is pricing in a majority victory for the BJP led coalition.
Quite certainly the polls are indicating of a potential case scenario, however there is still the element of the market becoming weary regarding its already bullish state given the 13 % and 27 % miss correspondingly between the precious exit polls along with the final count in the last two preceding election.