Short Term (Week Of June 25, 2012), The Dollar Vs. Euro and Oil Are Secondary Indicators Ahead Of EU Summit:
Investors will be focused on a variety of topics next week. The Supreme Court may rule on Obamacare and stocks related to the healthcare sector have become interesting plays in anticipation of the ruling. We have no exposure to the healthcare sector but we would be interested in picking up some positions if opportunities present themselves next week. Our overall outlook is bullish in the short term with benchmark sectors like financials, tech and small caps taking the leadership on any strength in the major averages.
The dollar, the euro and oil are also on our watch list to help us determine market direction. The EU summit is one of the last opportunities for the region to show some level of cohesion before the November U.S. elections and bond yields may move higher to levels that average 7 percent or more for the region. Market participants are expecting a breakthrough in talks that involve unique approaches to solve the European debt crisis and we expect to hear something positive from the meeting about solutions that have been discussed for weeks. The ECB decided they would accept various forms of collateral last week and we expect more headlines similar to this from the summit this week.
Leadership in our benchmark sectors would signal continued bullishness. Oil markets and the dollar vs the euro have slightly decoupled from the S&P 500 in recent weeks so we are using these gages as a secondary indicators.