E-Mini S&P 500: Out Of The Slump?

Includes: AA, BAC, BOE, C, CAT, GE, HAL, HPQ, JPM, XLF
by: DeWayne Reeves

The E-Mini S&P 500 spiked out of the range Tuesday with fairly optimistic traders! U.S. Wholesale Inventories were up 0.1%, while expectations were set for a 0.5% increase. The low growth in wholesale inventories may translate to a weaker fourth quarter GDP!

Today's Beige Book may show the moderate recovery of the US. It comes out two weeks prior to the next Fed meeting as the data comprised can guide the Fed on any further action necessary for the economy. The Fed may be frustrated with the moderate growth as they have been referencing further stimulus available.

Alcoa came out with earnings at a loss Monday, but revenue looked up and the demand expectations for 2012 were up 7%. Copper exports to China were also up leading investors to more encouragement. China's exports have actually weakened and the imports have slowed as well. China is looking for its total trade to grow at an average 10% between 2011 and 2015. The U.S. has slackened the Chinese imports in recent years due to the slowed economy and Europe has been in a recession for the most part again slowing any import trade.

Fitch's commented today that it was unlikely for France to be downgraded from its AAA credit rating which supported the Euro FX today! The potential downgrades of up to two notches may be reserved for Spain and Italy. Greece had a fairly good debt auction that may give them a boost. German Chancellor Merkel and French President Sarkozy took a hard line with Greece restricting bailout funds to terms of a bond swap and deal. We look forward to the Italian and Spanish debt auctions slated for Thursday and Friday.

The next Euro monetary policy announcements from the ECB and the Bank of England ((NYSE:BOE)) are due Thursday! The ECB is expected to hold rates at 1.0%. The eurozone heads insist on keeping the money supply balanced to avoid any potential inflation, so it will be interesting to see what creative financing ECB President Draghi may suggest.

Alcoa, while forecasting increased demands in 2012, has or rather will be cutting their smelting operations by 12%. One of the operations in Portovesme has Italian Unions trying to persuade the aluminum giant to keep 1000 workers in their jobs. Two Spanish smelters are slated for output cuts.

Iran confirmed that it was enriching uranium inside a mountain a couple of days ago and since have also sentenced an American to death as an alleged spy! The sanctions that the European Union want to impose on Iran oil shipments has caused the threats from the oil producing country to possibly block the Strait of Hormuz. The foreign ministers have moved up the meeting to discuss the ban to January 23rd. U.S. Crude stockpiles were up 397,000 barrels last week and Gasoline stockpiles were up 1.9 million barrels. This is a vulnerable situation due to many factors. Russia has opposed the sanctions against Iran. China has arranged for a barter system with Iran. (Other nations have signed waivers to cut back on shipments from Iran.) The United Arab Emirates have almost completed an oil pipeline to bypass the Strait of Hormuz, but has delayed the launch date now.

China is thought to become the number one oil importer in the world bypassing the US. Canada had been also creating a pipeline to the Pacific but has met conflicts with environmentalists. For the moment, nothing is pressing the market until Thursday, tomorrow we may trade higher!

On the stock side: JP Morgan Chase and Co. (NYSE:JPM) was up 2.01 % to $36.01. Citigroup Inc. (NYSE:C) was up 3.06 % to $29.97. Bank of America (NYSE:BAC) was up 5.58 % to $6.62. Alcoa Inc. (NYSE:AA) was up 0.05 % to $9.43. Boeing Co. (NYSE:BA) was up 0.63 % to $75.00. Caterpillar Inc. (NYSE:CAT) was up 2.87 % to $99.89. General Electric Co. (NYSE:GE) was down 0.90 % to $18.69. Halliburton Co. (NYSE:HAL) was up 2.69 % to $36.33. Hewlett Packard Co. (NYSE:HPQ) was up 0.57 % to $26.59. SPDR Select Sector Fund - Financial (NYSEARCA:XLF) was up 1.75 % to $13.70.

The only economic report due out today is the Beige Book. This analysis is used by the FOMC to help make their next decision on interest rates. However, it tends to produce a mild impact as the FOMC also receives 2 non-public books - the Green Book and the Blue Book - which are widely believed to be more influential to their rate decision.

E-Mini S&P 500 Chart.

(Click to enlarge)

Wednesday, what to expect! We maintain a bullish bias unless the E-Mini S&P 500 penetrates $1244.75! Wednesday, we anticipate an inside to higher day! Tuesday's range was $1292.00 - $1274.50. The market settled at $1286.25. Our comfort zone or point of control for this market is $1285.50. Our anticipated potential range for Wednesday's trading is $1297.50 - $1277.50. Longer-term, if we stay on the path, we are looking for potentially $1315.00 as the next upside target! For the shorter-term trader, we view $1265.00 - $1264.00 as critical levels. If these levels are maintained, we see the shorts getting squeezed out. On the flip-side, a break below the $1264.00 level could open the door to $1245.00 - $1235.00. We view these levels as potential buying opportunities!

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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