Morning Note - Markets hit short term resistance overnight

The session in the US last night was a fairly interesting one. Obama confirmed that the Bush Tax cuts that were due to expire in December were being extended and this prompted some early optimism - which proved to be short lived. The Securities Exchange Commission (SEC) ramped up its investigation into insider trading while there some jitters about the bottom line impact of the tax cuts. My view is that the sins of the US will come to bite in the years to come and this US currency will remain under significant pressure. We're only seeing such brash fiscal policy being rolled out because they are taking advantage of their position as the worlds reserve currency!

Still, looking at the price action of the major markets last night proves to be a little bit of a concern in the very short term (next couple of days). In the last couple of notes we've highlighted the importance of support levels on the downside (eg S&P 500  at 1170). This is equally true of resistance levels on the upside. Overnight, the broader indices and commodities broke to new highs but failed. This is a short term bearish setup. Have a look at the charts below to see what I mean: 

S&P 500 


DOW JONES 


COMMODITY INDEX


CRUDE OIL 



I don't think this is enough to be bearish, what this does show is that short term, we should be conscious that the price action may show some further weakness and we may pick up stocks at better levels in the next couple of days. As I said yesterday, the market is still in no mans land and I'll be more comfortable when we have a break on the S&P 500 of 1240. Until then, picking selective stocks and entering smaller position sizes is the game to play. 

Last night we saw the DOW JONES lost -3 points or -0.03% to close at 11359. In London the FTSE 100 added +38 points or +0.66% to close at 5808. 

James Gerrish 
(02) 9375 0117