The bulls are in the ascendancy.
– The S&P 500 closed at a new all-time high of 1745 on Friday, up 0.68%. It has broken strongly through the previous all-time high and market technicians are looking for a move to 1830ish. The Dow was 0.18% higher and the Nasdaq rose 1.32% as Google surged through $1000.
– Earnings season and the data catch-up will dominate the market. The debate will rage about whether this rally is sustainable fundamentally or has legs and when it might fall, but the market held up extremely well in the face of the US political debacle in previous weeks, so structurally it looks very strong.
– Also supporting stocks will be the strong rally in rates, with US 10-years now back down at 3.58%. That’s much closer to the Fed’s preferred level of below 3.5%, which is really good news for the recovery. Uncertainty about growth and the impact of the shutdown long-term is likely to push the taper into 2014, which is a further positive for stocks.
– As a result of all of the above, European stocks were higher. The FTSE rallied 0.71%, the DAX rose 0.60%, the CAC was 1.09% higher while stocks in Madrid and Milan rose 0.85% and 0.38% respectively.
– Here at home, the SPI 200 contract on the Sydney Futures Exchange rose 22 points to close on Saturday morning at 5343 bid. It should be another good day on the ASX today. BHP and Rio did well in London, which is a good lead.
– On Forex markets, the Aussie continues to head into the 97-98 cent zone we’ve been expecting for a while now and closed the week at 0.9668. Reuters is saying it’s held its gains in early Sydney trade this morning. The comments by RBA Governor Stevens that he was “helpless” during the US debate, while true, undermine cred to a certain extent. His comments that he’d like the Aussie lower but effectively can’t do much about it (also true) will just embolden the bulls. 97.70 is the 200-day moving average and it’s a very important level. Chinese GDP printing 7.8% on Friday is another boon for the Aussie.
– Elsewhere on Forex markets, the euro (1.3685) looks headed for 1.39/40, while the pound (1.6173) might get a lift from a Central Bank board member talking about raising rates over the weekend. USDJPY (97.71) is trapped within an ever decreasing zone and is poised for a big break in the next week or two.
– On commodity markets, Nymex crude closed at $100.86 and is very close to a big break lower which would be good for global growth – and my petrol bill driving to Sydney every week. Gold is at $1312, bouncing around still, but possibly forming a solid base for a rally in coming months. Copper is at $3.28 and on the Ags the volatility continued with Wheat up 2.88% (not a typo) while Corn and Soy Beans were quiet.
Things are slow on the data front, heading in to what is going to be a going to be a busy week as we start to catch up with delayed US data. Today we have revised Japanese export and import data, PPI in Germany and industrial production in Italy.
Employment data in the US is out on the 22nd.
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