It feels like Deja Vu…another government issue is causing more concern in the markets. This time, it’s the debt ceiling issue. The Treasury Department has been using emergency measures since the end of December to prevent a breach of the $16.4 trillion debt limit. Investors seem to be showing more fear over the outcome of the latest debt ceiling scenario. What are we to expect? A government shutdown? No more social security payments? Or, by the simple wave of a wand, the debt ceiling will increase another hundred billion once again and everything will go “back to normal.”
Even with the latest concern, the U.S. equity markets are still behaving strongly in the face of this looming uncertainty. The MAR13 E-mini S&P 500 futures are trading slightly down at 1462, or down .15%. The E-mini Nasdaq is down .66% this morning. The S&P 500 is still trading well above our key pivot area of 1420-1430. At this point, we still hold our bullish views of this market and believe that the market will march up to 1500 in Q1, provided the debt ceiling debate concludes with a raised limit. Furthermore, Bernanke continued his dovish ways in indicating that QE3 might not be ending as soon as the market may have concluded after the FOMC minutes were released.
QE affected markets, such as precious metals and bonds, are both rallying this morning, with gold futures up $12 to $1,681 and U.S. 30-year bonds trading up .5%. FEB13 gold futures are approaching our first resistance level at $1,690. Platinum is continuing its hot streak today, trading up $27, or 1.66%.
We focus on the Swiss franc futures market today. The Swiss franc, typically known as a safe haven currency, has recently dropped. This move is likely because of a more positive market consensus that Europe will come out of the sovereign debt crisis successfully and start to pick up growth again. The Swiss franc has stayed below key resistance of 1.11, and now is also below a key pivot level of 1.085. We would not be surprised to see the franc head lower from here, and find a short term trading range between 1.095 and 1.055.
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