Overnight trading resulted in some volatile moves, especially in U.S. stock index futures. Yesterday evening as news hit that fiscal cliff negotiations had stalled, we saw the March ’13 E-mini S&P futures rapidly drop from the mid 1440′s to 1393. The S&Ps then immediately were bought back up to the mid 1420′s, which is where they are trading as of this writing. As we noted yesterday, it seems like while the market is close to yearly highs, there still is a strong element of caution among traders. This is largely due to the massive implications of the fiscal cliff negotiations. We still believe the 1420-1430 region is very pivotal for S&P futures. Whatever happens fundamentally, we believe this is a major pivot area for this market. This area will either serve as a base for a rally to 1500 or a ceiling for a drop to 1375. We are more bullish than bearish, mainly due to U.S. housing and jobs data picking up steam.
In currency news, the US dollar has reversed course from recent selling, and is now rallying up towards the pivotal 80 level. This is due to the fiscal cliff negotiations stalling, and thus safe haven buying moving back into the U.S. dollar. The New Zealand dollar took a hit after economic data for the region came in less positive than expected. The NZD has dropped around 300 ticks in just a few sessions. The Swiss franc had a 200-tick rally since breaking out of the 1.08 resistance area, and is now taking a breather, trading down 41 ticks today. We believe there is more upside for the Swiss.