The S&P 500 futures have rallied right up to a key resistance level at 1193 in European trading on Wednesday morning. As noted yesterday I believe that POMO will prevail in the near term and would be looking for traders to test the 1200 level and beyond in coming sessions.




There is a more positive tone towards the euro this morning in European trading, although short covering is surely a factor given the severe declines in November. There is considerable anticipation of what Monsieur Trichet may have to say tomorrow after the ECB meeting and many funds will probably remain sidelined until it becomes clearer whether the ECB will deliver any surprises.

One idea which is gaining currency (unlike the euro itself) is the notion of issuing Eurozone bonds in place of the piecemeal fashion in which separate sovereigns have been issuing their own debt but in a collective currency. This would address one of the major structural flaws in the EMU architecture (there are many others) but it would require major treaty changes and other infrastructural changes which may not be politically acceptable - especially to Germany.

GBP/USD should encounter resistance around the level indicated by the arrow on the daily chart i.e. $1.5750.



In yesterday’s commentary I discussed the French market and made a mis-statement in the daily column which is sent to subscribers (but which I corrected in the version that goes to other web publishing outlets) when I mentioned that France is the fourth largest economy.

After checking the relative sizes of GDP - which is just one method of determining what it means to compare magnitudes - it would appear that France ranks as number five after the US, China, Japan and Germany.

The CAC 40 however continues to display itself as one of the weaker major indices of European core, although the close yesterday brought it to a potential supporting trend line from the July lows.



AUD/USD has bounced off the bottom of the Ichimoku cloud on the daily chart below and the positive news from China overnight could well help to re-energize the Aussie currency over the next few sessions - especially if there is a respite in the EZ crisis.

In the intermediate term the larger technical picture suggests that the level indicated on the chart around 0.9400 seems to be a likely target when the pullback phase has run its course.



Yesterday I suggested that "EWQ, an exchange traded fund which tracks the MSCI France index seems to be headed eventually toward a test of the $22 level." I would suggest that the price action on the ETF is likely to see a bearish flag formation develop in the near term and I would wait for better entry opportunities on the short side.



PCY continues to erode as many large funds are losing their appetite for riskier sovereign credits, but I am now flat on this ETF.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market.