US stock futures are edging higher in the pre-market Wednesday, following an extremely quiet trading day yesterday. The S&P 500 ETF (SPY) traded 1/5 of its average daily volume and volatility was low. The action was characteristic for this week of the year between the Christmas and New Years, and there is no reason to believe anything will change today.
Action may be muted, but there are some pockets of optimism in Europe this morning. Italy, which last month yielded 6.5% on its six-month debt auction, today saw that number cut in half as they raised $14 billion at a 3.25% clip. The auction signals that perhaps extreme jitters in Europe are subsiding, and the region’s troubled economies may be able to continue to borrow their way out of their current predicament without outright asset purchases by the ECB.
Italy is Europe’s third-largest economy, and seen as too big to save if it were to head toward default. It will have another debt auction on Thursday, and if that goes well it could provide further impetus for a rally in the New Year. Policy makers’ focus has been on ensuring dollar liquidity in the European banking system rather than bond purchases.
The US economic data calendar is bare for Wednesday, while yesterday better-than-expected consumer confidence boosted futures early before they fell back to the flat-line.
TECHNICAL TAKE
As long as the S&P stays above 1259, the bulls have control of the ball with good field position for some momentum into year-end and the New Year. If we do get any downside pressure over the next few days, the S&P can still even test the 1248-1252 zone and still be okay.
Resistance is Yesterday’s high of 1269 then the 1275-1277, which I believe is very attainable into the end of the week after this very positive debt auction in Italy. The major hurdle is the October 28th high of 1292.66, and I think we will need some new money inflows in 2012 to reach that level.
If you take a look at the OFF THE CHARTS newsletter from last night you will see charts of several stocks and indices we have been outlining recently. We are starting to see some bullish set-ups return in individual stocks, but we are also seeing that it is becoming a very stock and sector specific tape. Correlation has falled over the past few months, which I believe is a positive thing for traders and investors.
