Euro Falls to Lowest Level in 16 Months

Thursday, January 05, 2012
Stock Market Commentary:

Stocks and a slew of other risk assets ended mixed to lower for a second straight day as fears resurfaced out of Europe. Investors are hopeful that 2012 will be a better year for U.S. equities and risk assets than 2011 or 2010. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. It was also encouraging to see the S&P 500 break above its downward trendline and its longer term 200 DMA line (shown above). Looking forward, the next area of resistance remains Q4’s highs (1292) and then 2011 highs near 1370. In addition, the bulls remain in control as long as the benchmark S&P 500 trades above  its 200 DMA line.

EU Fears Resurface- Again & U.S. Employers Add Jobs:

Overseas, stocks sold off after the euro fell to a fresh 16-month low as fears spread regarding the continents onerous debt levels. The closely watched euro fell below 1.28 for the first time since September 2010 which normally bodes poorly for other risk assets. However, U.S. stocks curbed their losses as investors digested a much stronger than expected jobs report. ADP, the country’s largest private payrolls firm, said U.S. employers added +325,000 new jobs last month which easily topped the Street’s estimate. The stronger than expected jobs report bodes well for Friday’s jobs report.

Market Outlook- New Rally Confirmed

Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December. Now that the major U.S. averages scored a proper follow-through day the path of least resistance is higher. Looking forward, one can err on the long side as long as the benchmark S&P 500 remains above support (downward trendline and 200 DMA line). Leadership is beginning to improve which is another healthy sign. Now that the 200 DMA line was taken out it will be important to see how long the market can stay above this important level. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!