With all of the world’s problems now solved the broad markets have done little to exhibit their thanks. No that isn’t really a joke, it is however pure sarcasm. On the heels of an E.U. agreement on banking that really has not created ideal mechanisms and sees France and Germany still sparring over details, and ‘fiscal cliff’ issues from the States nearing only limited parameters, and a FOMC policy statement which insures that the Fed will keep printing on money – what’s not to be happy about. Plenty actually. And while we are having this reality check, lets not forget to mention geo-politics from certain nations in the Middle-East that appear to be staying together with nothing more than glue. But lets not digress too much, the holidays are almost among us and it is a season of celebration.
The EUR continues its journey into the land of fantasy as it has climbed nearly back to mid-term highs. The value of the Single Currency is pretty much devoid of any quantified realm of logic considering that Spain, Italy, Portugal, and Greece – not to mention France (except we just did) are completely overburdened with debt and that someone down the road must pay for the bills. However, the EUR parades merrily along as the Federal Reserve across the Atlantic continues to print money and pump it into Treasuries at an absurd rate not only making the USD weaker, but making the equity market the only game in town. That is unless you are an investor who actually questions the direction of things such as the new and almost famous ‘Evans Rule’ from the Fed and believes that somewhere down the line if an obstacle – pot hole – were to occur that the U.S. economy would snap in two like a weak branch on a tree.
Wall Street has shown little in the way of desire to climb further recently. Yesterday’s equities results were not upwards and Retail Sales data reported disappointing numbers. And back to Europe, the German Flash Manufacturing PMI reading this morning was negative – yes, recession like, with a result of 46.3. Later today CPI figures and the Flash Manufacturing PMI will come from the States.
Gold has had an interesting trading journey the past couple of weeks and has sunk back below 1700.00 as of this writing. The precious metal has stumbled with little in the way of inflation brewing outwardly. Crude Oil has maintained its consolidated pattern and WTI languishes near 86.00-87.00 USD per barrel. While the price may be in the range that still produces a profit for producers, the lack of any movement upwards shows that demand is not exactly rising for this physcial resource. The great economic savior, China, while showing that growth continues has not shown the ability to create global momentum. It is not China’s fault alone however, since they rely on export to the European Union and States in order to propel their manufacturing base.
Traders should keep in mind that next week will see the last of full volume markets until the holidays are finished. Forex has essentially shown that trends are in favor and one of the most interesting pairs is the USD/JPY in which the Yen has shown a desire to try and match its spring lows against the Greenback.
Commodities continue to see some sideways trading, particularly among the grains which have moved according to rumors swirling about inventory and a constant fascination regarding weather. Strong rains in Argentina produced some concerns about the planting season earlier this week among traders.
But again, it is politicians and their appointed officials that rule the day. We are well within this complex ‘confidence game’ brought to you by the E.U. and U.S. without any end in sight. It is up to traders and investors to gauge the psychology of the market and then take advantage of market conditions.