(The Weekly Digest reproduces the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers. )
FORTUITOUS TIMING BEFORE THE MONSTER RALLY BUT SHY AWAY FROM EXUBERANCE
In two days, the stock market rose about 700 DJIA points from the low. On the day of the low, ZYX Buy Change Alert headline, “NO STOCK MARKET CRASH, ANY FURTHER DIP WILL BE A BUYING OPPORTUNITY, AND REDUCING THE HEDGE.”
It is important to understand the rally and shy away from exuberance. A big part of yesterday’s rally is from the mechanics of quadruple witching. Quadruple witching consists of expiration of stock index futures, stock index options, stock options, and single stock futures. Usually such a rise tends to reverse on the following Monday. However, this typically does not happen in the Christmas week. This means that post-Christmas, risk becomes higher of another down draft.
In the pre-market, stock futures continue with the rally mode. This rally will likely last until 9:15 am.
Interest rates are finally rising from extreme lows.
Gold, silver, and oil are range bound.
Our very, very short-term early stock market indicator is neutral.
Gold futures are at $1194, silver futures are at $15.87, and oil futures are $55.10.
S&P 500 resistance levels are 2100; support levels are 2038, 2017, and 2000.
DJIA futures are up 49 points.
FED STARTS THE PARTY, SWISS BRING THE BAND
Fed started the party by including the phrase ‘considerable period’; yesterday after the Fed statement, bulls easily won the battle against the bears.
The Swiss brought the band to the party by introducing negative interest rates starting January 1, to fight deflation and cool the Franc.
Not to be left behind, Saudi said oil price drop is temporary.
Putin joined the dance by claiming Russia’s economy will recover in two years.
Samaras of Greece tried to join the party but failed to get enough support for his nominee for a new head of state, Greek market slumped.
Oil, gold, and silver are dancing higher to the tune of Swiss negative rates.
Just like Greeks, interest rates stayed home by being unchanged.
Our very, very short-term early stock market indicator is positive.
Gold futures are at $1203, silver futures are at $16.05, and oil futures are $57.71.
S&P 500 resistance levels are 2038, 2063, and 2100; support levels are 2017, 2000, and 1975.
DJIA futures are up 182 points.
WILL THE FED APPLY BALM TO THE VOLATILITY?
FOMC will end its meeting today and release its policy statement at 2:00 pm ET. There is a major debate as to the phrase ‘considerable time.’ Previously the Fed has used this phrase to indicate that it will not raise interest rates for a considerable time. In our analysis, if it was not for the fall in oil, the Fed would have removed the phrase and given a clear indication to raise interest rates in 2015. Now it can go either way.
If the phrase is removed, it may cause volatility to go higher; those who think that such a move means U. S. economy is strong will buy, those who are addicted to printing presses will sell. There is no way to predict in advance the net result.
The Russian ruble has stabilized.
Interest rates are moving slightly higher.
Oil, gold, and silver are range bound.
Our very, very short-term early stock market indicator is neutral.
Gold futures are at $1197, silver futures are at $15.84, and oil futures are $54.52.
S&P 500 resistance levels are 2000, 2017, and 2038; support levels are 1950, 1925, and 1900.
DJIA futures are up 68 points.
RUSSIAN RUBLE IN FREE FALL BUT NOT THE REAL REASON BEHIND FALL IN STOCK FUTURES
Russian currency is in a free fall. However, Russia has the money and means to stop the free fall. Russian central bank has about $466 billion in reserves, its sovereign fund has another $100 billion.
Russia can simply not afford for the ruble to continue in free fall. Sooner or later ruble will stabilize.
The real reason behind the fall in stock futures is a comment coming from Germany against QE by ECB.
Oil continues to fall.
Interest rates are falling as investors rush into the safety of Treasuries.
Gold and silver are getting a safe haven bid.
Our very, very short-term early stock market indicator is mild positive.
Gold futures are at $1210, silver futures are at $16.36, and oil futures are $53.74.
S&P 500 resistance levels are 2000, 2017, and 2038; support levels are 1950, 1925, and 1900.
DJIA futures are down 41 points.
STOCKS AND OIL REBOUNDING, SILVER BREAKS SUPPORT
Last night after falling to $56.47, oil has been staging an aggressive rebound. Oil is very oversold but any big bounce is likely to be sold.
S&P futures overnight fell to 1994.50 but then followed oil with a strong rebound.
Silver has been stubbornly holding support at $17.00. Last night the support was broken. Silver bulls are trying to mount a rally but so far without success.
Interest rates are moving up this morning.
Our very, very short-term early stock market indicator is positive.
Gold futures are at $1209, silver futures are at $16.84, and oil futures are $57.88.
S&P 500 resistance levels are 2017, 2038, and 2063; support levels are 2000, 1975, and 1950.
DJIA futures are up 107 points.
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