NOTE: Every week I write a Client Note for my clients. For a limited time, I am allowing non-clients to sign up and receive the Client Note. You can sign up at the top right hand corner of the website. I will also be posting the notes on my blog with a time delay from time to time. Here is this week’s.
Originally sent December 2, 10am PST.
Tell me what the euro did on any given day and I’ll tell you what the S&P 500 did. That’s because the euro has become a sort of barometer of risk appetite.
During the rally from early September through early November, the euro rallied as well – from the mid $1.20s all the way up to $1.42 on November 4th.
Over the last few weeks, as stocks have corrected, the euro has led the way declining all the way down to $1.30 on Tuesday.
Finally, the euro – along with European stocks – have bounced the last two days. The euro is up to $1.32 and the Euro Stoxx 50 5% leading a rally in US equities.
In just the last two days, the S&P 500 has gained back almost everything it lost during the preceding three week correction. Currently trading at 1218, it is pushing up towards the highs of the year around 1225 and at the top of a short term range of 1180-1225.
This sets up perfectly heading into tomorrow morning’s November Jobs Report. As I wrote last week, the failure in early November at 1225 created a double top which is strong resistance for stocks (“Top Gun FP Client Note: Double Top”, Top Gun Financial, sent to clients November 22).
The reaction to tomorrow morning’s report will tell us a lot about the meaning of the last two days: Is it just a bounce or is it the beginning of a legitimate year end rally that will push us to new highs and set the tone for a strong 2011?
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