**21/09/10 - 8.37am - by James Gerrish**
Overnight, the DOW JONES added +145 points or +1.37% to close at 10,753. The FTSE 100 added +94 points or +1.71% to 5602. Locally, SPI Futures are matching +42 points indicating a stronger open this morning.
GAME ON....! Does a break above 1130 in the S&P 500 signal another leg higher in the market or are we getting ahead of ourselves? It depends who you talk to and arguments can be made for either scenario, after all - different opinions are what makes a market!
My opinion is that last nights trading action is very constructive for further upside in the near term at least. I wouldn't be surprised to see a move higher followed by a pullback and consolidation above 1130 on the S&P. This would be the ideal setup and one that is likely to front run a longer term move higher. I'm going to fall short of calling for a break of April highs at this stage as I'm cautious about getting overly optimistic, but the set up is starting to gain traction.
Corporate Bond yields are rising reflecting a move back towards riskier assets while demand for commodities and increasing corporate activity (IBM announced a $1.7 billion deal overnight) is also positive. On the flip side, the continued rise in Gold could suggest that investors are a little skeptical about the move although it could also represent concern that the USD will continue to be under pressure for years to come. I'm leaning towards fundamental weakness in the USD as the major factor that will support Gold moving forward.
Make no mistake, there are still issues in Europe and this was shown overnight with the Yield on Irish 10 year notes hitting 6.48% from 6.29%. This compares with 2.47% for German Bunds that mature in the same year. Portugal is also a concern with Bonds there up to 6.39% from 6.09%. The European situation is still a concern and is likely to remain that way for some time. The patriotic Aussie in me would ask the question....."How much Iron Ore & Coal does Australia Export to Ireland and Portugal?...." Not much at last check.
I know that we live in a world were economies are interrelated however our main trading partner - China - continues to be in good shape. The speech by the RBA that I sent around yesterday gave a strong insight into this theme.
The RBA releases the minutes from its last meeting at 11.30am this morning.
My best picks today remain Origin Energy (ORG), ASX (ASX) and Woodside Petroleum (WPL)
