MARKETS SPECTATOR: Rally up

It’s been another impressive night on Wall Street as the bulls quickly took control following a modestly lower open. Earnings news has been mixed while economic reports into the housing market came in stronger-than-anticipated, spurring the bulls into action.

With 20 minutes of trade remaining, the broad-based S&P 500 is 0.5 per cent firmer while the NASDAQ and Dow Jones industrial Average are 0.2 per cent and flat respectively.

Interestingly, the chart below shows that the S&P 500 is very close to testing its recent highs, which will almost certainly attract some selling pressure. However, given the uptrend and momentum that is building in US stocks, there is a good chance it will break through in the not too distant future.



Source – StockCharts.com

So it looks like another strong open for the local market, with SPI futures calling the S&P/ASX 200 22 points higher around 4550 mark. Judging by the broad-based rally on Wall Street, we should see widespread gains across most sectors, with the energy and financials likely to front the pack inline with offshore markets.

Materials names will probably have a pretty good start to the session following overseas leads before attention quickly turns towards the big data releases due out of China. There has been a real improvement in the view towards China and the state of the economy over the last two weeks. Hence, there will be a lot of eyes in front of the Bloomberg terminals come 1pm when GDP, Fixed Asset Investment, Industrial Production and Retail Sales are all slated for release.

In terms of expectations, GDP is forecast to come in at 7.4 per cent, Industrial Production at 20.2 per cent and Retail Sales at 13.2 per cent. Anything that tops these forecasts could really light a fire under the materials sector as the view of an improving China gather momentum.

On the flipside, any big misses could really damage the recent pick up we’ve seen in sentiment.

There will be a lot of eyes on the Australian dollar too around this time. Given the big push higher the Australian dollar has seen over the past 36 hours, it could be subject to some profit taking or ‘buy the rumour, sell the fact’ kind of trade surrounding these releases.