Euro Tumbles Over Italy

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Data showed purchases of new homes in the U.S. jumped in January to the highest level since July 2008, propelling US equity indices to rebound from a recent slide. The recent slide has likely been induced by two major items: 1) the Italy election uncertainty, and 2) the looming spending cut possibility. It seems as though that the actual economic data (housing, jobs, etc.) is what is holding up this market, which to us is solid ground. The market has had a significant run up in the first 45 days of 2013, and the market took the aforementioned two items to take some profits and rebalance. Our major decision level is 1460 for the SP 500. Today, the MAR13 contract traded down to 1483, and is up 2.75 points today to 1490. We believe the market will trade higher and hold above 1500, but the Sequester issue is the main driver of short term trading.

Gold and silver have shown nice rebound rallies this morning. APR13 Gold futures are up almost $28 today, trading at $1614, up from a $1560 low just last week. We believe gold is rallying with the political risk premium re-entering the market. We have our major resistance level at the $1630-$1640 area. We don’t see gold rallying above this level and staying there.

We focus more on the Euro Currency, and the currency markets overall. The New Zealand dollar is a big loser of the day on the foreign currency markets. The NZD is down 1.4% today, trading down to .8239. Our major first resistance level is .8325, and our first downside target is .8100. The Euro currency has sold off sharply recently, likely based on concerns over Italy’s fiscal future with the election uncertainty. Our levels are as follows: 1.33 resistance, 1.30 key pivot level, 1.27 first major downside target. We believe the US dollar is in the first legs of a rally, thus we believe the Euro currency has farther to fall.

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