Good News from Redmond Lifts Markets
S&P – Stocks continue the recent recovery rally, aided by strong earnings news from Microsoft. The tech giant beat the Street estimate and gave a more upbeat forecast for future revenues, infusing the market with some early good news upon which to build. It is beginning to look like the panic rocking the markets earlier this week was fueled, at least in part, by French bank Société Générale liquidating long FTSE futures established by a rogue trader. Companies that do not have a direct link to consumers or banking have reported solid earnings and attracted widespread value buying, while firms relying directly on consumers will have the toughest time rebounding, as financial stocks figure to benefit quickly from the Fed rate cuts. March e-mini S&P’s have given an indication that this recent reversal may spark further rallies, although plenty of resistance still lies ahead. Momentum has moved higher, but remains at a bearish -120. Support comes in at 1338, 1323.50 and 1314, while resistance can be found at 1362, 1371.50 and 1386.
Gold – February Gold made new all-time highs today, despite a stronger Dollar and higher equity prices. After taking profits last week, Gold bulls have been buying with great zeal over the past two sessions. The emergency rate cut earlier this week, along with speculation that the Fed will once again cut rates next week, has led many traders to believe that a greenback recovery will come later rather than sooner and could ultimately create a highly inflationary situation in the U.S. Commodity prices were higher across the board yesterday and this morning, suggesting money is moving back into futures markets from the sidelines. If February Gold is able to hold these gains, it would signal a new breakout and possible push toward the $1000 mark. Momentum remains very bullish at the moment and the RSI is quickly approaching overbought levels. It will be interesting to see how the February contract behaves when we approach overbought levels, as the market tends to pick up steam at 70-75 percent in a strong bull market, and strong selling pressure may be an indication of choppy sessions ahead. Support comes in at 892, 878.30 and 867.30, while resistance can be found at 916.80, 927.90 and 941.60.
Rob Kurzatkowski, Commodity Analyst
