Fundamentals:
The German IFO report and U.S. Durable Goods Orders will be the most closely watched data releases on Wednesday and then we have another heavy round on releases coming out before the Thanksgiving holiday. Then, we will have UK GDP, US New Home Sales, and US Personal Spending.
Germany's IFO consensus expectations are for unchanged numbers from the previous month. But with the positive data we have seen recently from Germany creates the possibility for a surprise to the upside. German GDP yesterday came in at 0.7% quarter over quarter, but some of the details were less optimistic.
Specifically, growth in private consumption expenditures rose only 0.4%, which led Germany to increase its government spending by 1.1% for the quarter (or 4.5% annually). Investment in equipment grew 3.7% following 4.4% in the first two quarters. Net exports rose 2.3% and imports grew 1.9%.
Yesterday, we also saw the German PMI Manufacturing report for November, which surprised to the upside at 58.9 from 56.6 previously. This is the highest print since July and is very encouraging for the growth prospects in the industrial sector. The service sector also came in high, at 58.6 from 56.0 previously.
US Durable Goods Orders will be seen today, but markets are not expecting much. Orders have slowed the last two quarters and if we subtract the transportation component, we are seeing quarterly growth of -1.0%.
We saw the minutes from the last FOMC meeting yesterday, but there was little in the report to change market perceptions but expectations for GDP and employment were both downgraded. This was largely expected after the Fed chose to inject its second round of quantitative easing. GDP is 2010 is projected to be 2.5%, where before the expectation was 3.0-3.5%. Growth in 2011 growth is now expected to come in at 3.0-3.6%.
Technicals:
Commodities:
Gold is coming into some strong resistance with the old highs and a 62% retracement level at 1380. Hourly indicators are solidly bullish but nearing overbought levels. If the Fib resistance overhead does break, we start to target the old highs near 1420.
Currencies:
The EUR/USD is continuing to fall off a cliff, breaking support levels at 1.33. We are coming into some longer term Fib support at 1.3270, which is an area that we have been waiting for to enter into long positions. But given the strong momentum of the current drop as well as the fact that daily indicators are bearish without being oversold, it is starting to look like this area might not hold. That said, sellers trying to enter now are late to the game. We are still looking at this pair with a contrarian view, but entering into long positions now will require wide stop losses.
Stocks:
The S & P 500 has traded back to the 1170 support level after failing again at 1205. Indicators on the 4H chart are bearish and the lower highs here are suggesting that support will eventually give in. First resistance comes in at 1185, medium term target is 1150.