Summary:
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All US benchmarks called to begin higher
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S&P500 back near 6-week high
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Record highs on tap or is this a false dawn?
Traders could be forgiven for thinking that the major markets would be in a holding pattern before Wednesday’s eagerly anticipated Fed meeting, but Mario Draghi appears to have caught many off guard this morning with an unexpectedly dovish message from the ECB president that has sent stocks around the globe surging higher.
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The comments from Draghi sent European markets surging with the Dax in particular rallying strongly (+300 points off the lows). The remarks have also boosted US stock futures. Source: xStation
M30
Looking at longer time frames such as the M30 we can observe that the market is now back near a 6-week high at 2911. The S&P500 was actually trading a little lower on the day before Draghi’s comments but there’s been a rally of almost 30 points since and the market is once more probing prior resistance here. Source: xStation
The near-term outlook is clearly positive for US stocks, and a break above 2911 would leave little by the way of overhead resistance until the all-time highs of 2961. While the moves seen in Europe or bordering on the euphoric it is worth keeping in mind that the ECB has limited scope for additional stimulus measures and that the Fed is really the central bank that has the ammunition to deliver a large and sustained package. With the Fed given an 80% combined chance of cutting in the next two meetings and the market pricing in 2 further cuts before the year is out, the bar is pretty high to deliver a dovish message. A less dovish than expected Fed tomorrow could curb this equity rally and stop it in its tracks, but if it plays ball and delivers then it seems that a push up into uncharted territory is almost a foregone conclusion.
The S&P500 is in an uptrend according to the EMAs and unless the Fed disappoints tomorrow then it seems likely that the market retests its record peak around 2961 in the not too distant future. Source: xStation
