Market Perspective for November 3, 2014

This week is an important one for many markets.  Several major stock indexes, along with currency and commodity markets are all at important support or resistance levels. Coming up against resistance or having recently crossed into new highs are the Russell 2000 Index, S&P 500 Index, Dow Jones Industrials Index and Nikkei 225. Near to breaking support are gold, oil, yen and the euro.

Ahead of the Bank of Japan’s decision to increase its quantitative easing program, stocks were set for a rally. Stocks still appear poised to move higher, but the BOJ’s move clouds the outlook for oil, gold and currencies. Where gold, oil and foreign currencies were expected to bounce, now we could see a further decline. A strong U.S. dollar will mean cheaper imports and cheaper oil, which will support stocks over the short term. Long-term, the rise of the U.S. dollar can pose a problem for the markets, but that may not manifest until 2015 at the earliest.

Key levels this week are $1.25 on the euro, $80 for oil, $1190-$1200 for gold, 1180 for the Russell 2000 and 2010 for the S&P 500.

This week won’t be heavy on economic data, with the most important release being the unemployment rate for October. Instead of economics, the big news is politics. Polls have the Republicans likely to win the Senate, but it’s unclear at this point whether that will be known by Wednesday morning, sometime in December, or January 2015. Due to the potential for run-off elections in Louisiana and Georgia, the fate of the Senate may not be decided for several months. If Republicans clearly take control of the Senate, the removal of political uncertainty will be good news for U.S. stocks.

On the earnings front, Qualcomm (QCOM) and Disney (DIS) highlight a week with fewer big name blue chip companies reporting. CVS Health (CVS), Chesapeake Energy (CHK), Whole Foods (WFM), Tesla (TSLA) First Solar (FSLR) and Wendy’s (WEN) also report.



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