The E-Mini S&P 500 closed 2011 about the same as 2010. The US economic data is showing modest growth. It has been all about jobs and housing in the US. The employment numbers are showing improvement and the housing market is thought to have bottomed. The downgrade of the US from the AAA credit rating by Standard & Poor's back in August was a jolt for the country thought to be a mecca of growth over the years. The US government was taken to the test over spending cuts, tax hike issues and was viewed as lacking a cohesive agreement.
The markets suffered as funds liquidated positions based on changed allocations and the safe-haven products benefited from some of the uncertainty and fear in the marketplace. US Treasury Bonds reached a high of $147^00 and gold hit highs at $1911.60. We have turned into a global marketplace though with a broader scope of economic data and interrelated markets that affect the moves daily.
China is now the powerhouse that we look to for patterns of economic growth. We look to the valuation of their yuan to our US dollar and evaluate the import/export data. The Eurozone debt crisis has cast a shadow over the marketplace as the potential defaults may overlap into US corporations. The Eurozone has dodged the bullet for the most part all year. The European Central Bank (ECB) has issued cheap loans to add liquidity to the marketplace in the hopes that the Euro banks may purchase some of the debt instruments of one of the ailing nations.
Italy has been the most noted as of late due to the tremendous size of the economy and the amount of money that would be needed to potentially bailout the nation. Spain has perhaps entered into a recession with an economy that may have constricted by 0.3 % in the fourth quarter, but they have strong tourism and are managing their trade deficit. Greece had been the concern prior to Italy. Greece has austerity measures to adhere to in order to qualify for the support of the International Monetary Fund (IMF) and the European Union (EU).
The first quarter of next year presents new challenges for the Eurozone as large sums of money must be refinanced. The ECB has issued the cheap loans, but the banks are hesitant to loan each other money and prefer to keep the funds in the ECB's overnight depository or to hoard the money. The ECB had withdrawn the potential idea to loan the IMF money or increase their bond purchases. The European Financial Stability Facility (EFSF) was named by the credit rating agencies as potentially being downgraded along with 15 of 17 of the European nations. The EFSF had then been regarded as the temporary facility and Euro leaders reactivated the European Stability Mechanism (ESM) to act as the permanent facility to handle the debt crisis.
The ECB has negated the idea of allowing any stability fund any banking abilities. The Italian auctions Thursday had sold about $7 billion euros worth of bonds ranging from 3 -10 year maturities at the non-sustainable 7 %. The first quarter of 2012 possibly will show some exhilaration going in, but as the Euro debt crisis unravels, there could be some severe downslides in the market.
We look to a higher market going into this week with caution.
Further turmoil in the Middle East may be in store as Iran has threatened to block the Strait of Hormuz if sanctions are imposed. Iran has been under scrutiny from Euro leaders due to the nuclear program and potential activities that may culminate from it. The US has a large military presence in the Gulf, but Iran has alliances with Russia and China. Any further action could wreak havoc in the markets.
On the stock side: JP Morgan Chase and Co. (JPM) was down 0.51% to $33.21. Citigroup Inc. (C) was down 1.68% to $26.30. Bank of America (BAC) was up 1.83% to $5.54. Alcoa Inc. (AA) was up 0.23% to $8.65. Boeing Co. (BA) was down 1.03% to $73.35. Caterpillar Inc. (CAT) was up 0.02% to $90.60. General Electric Co. (GE) was down 0.89% to $17.96. Halliburton Co. (HAL) was up 2.13% to $34.51. Hewlett Packard Co. (HPQ) was up 0.55% to $25.76. SPDR Select Sector Fund - Financial (XLF) was down 0.54% to $13.01.
Tuesday, we have US Construction Spending and ISM Manufacturing Index due out at 9:00 AM CST.
E-Mini S&P 500 Chart
Tuesday, what to expect: We are technically in buy mode on the Daily Chart unless the E-Mini S&P 500 penetrates $1212.50. Tuesday, we anticipate an inside to higher day. Friday's range was $1260.50 - $1250.75. The market settled at $1252.50. Our comfort zone or point of control for this market is $1256.005. Our anticipated range for Tuesday's trading is $1265.50 - $1245.50. The E-Mini S&P 500 has continually failed to breach the $1266.00 zone, thus potentially it may result in a reversal.