Antiaircraft fire is picking up and light's the skies over Baghdad as the "shock and awe" phase of the coalition's campaign to overthrow Saddam Hussein has news agencies reporting that U.S. and British ground forces have seized southern oil assets and two key airfields in Iraq.
Rumors that Saddam Hussein may have been killed in the "first strike" have begun to proliferate various news wires, with the BBC recently reporting that Saddam was probably killed in a bunker strike.
While the "shock and awe" phase of the coalition attack on Iraq unfolds, another "shock and awe" phase of bullishness builds in the major indexes here in the U.S., with the Dow Industrials (INDU) 8,469 +2.2% now surging 182 points, the broader S&P 500 (SPX.X) 892 +1.8% gaining 16.5 points, the S&P 100 (OEX.X) 454 +1.96% boldly moving above downward trend and 200-day simple moving average, and NASDAQ-100 Index (NDX.X) 1,097 +1.6% rising 17 points and to the January relative highs of 1,100.
Sector action is broadly positive, while the more "defensive" Gold/Silver Index (XAU.X) 62.70 -3% and Defense Index (DFX.X) 139 -1.3% along with Oil Service (OSX.X) 84.71 -3% falter as new reports look to be negatively impacted by coalition forces success in Iraq.
Treasuries continues to see a "shock and awe" round of selling with the shorter-dated 5-year YIELD ($FVX.X) continuing to rise and jumps to 3.079%. The longer-dated 30-year YIELD ($TYX.X) 5.039% also rises sharply and has now made its way above the 200- day SMA of 5.015%, and per 11:00 EST update at OptionInvestor.com, does indeed have Dow, SPX and OEX making their bold moves above their 200-day SMA's.
With WEEKLY and MONTHLY R2 levels of resistance being broken to the upside, one of the "only" bullish targets I've been able to come up with near-term is Dow 8,600 as an index target should the Dow Industrials make another concerted move above today's highs of 8,475. This 8,600 level is derived from some preliminary relative strength work done in last night's Index Trader wrap, whereby we are looking for levels in the Dow, where a further shift from Treasuries, which certainly looks to be continuing, would have the Dow trading.
The strong surge in the major indexes looks to be formidable, and there have been reports from the various trading floors, that short covering is picking up as upside levels of potential resistance continue to be broken.
While a strong round of selling in Treasuries is present in today's trade, a quick check of the U.S. Dollar Index (dx00y) 102.13 +0.96% hints that foreign currencies continue to flow toward U.S.-denominated assets, and that translation of funds looks to be continuing to flow toward equities. The U.S. Dollar Index has now achieved levels not seen since its December lows and I would deem a Dollar Index (dx00y) break above 103.20 as further bullish for the dollar and would then have its 200-day SMA of $104.70 in play. If so, this type of bullish action for the U.S. Dollar builds the impression of renewed confidence not only in the dollar, but perhaps the U.S. economy itself.
One thing that has caught be a bit "off guard" that I mentioned earlier today in the market monitor at OptioinInvestor.com is the decline in the June Fed Funds futures contract (ff03m) 98.83 -0.05%. This action now has market participants not as sure of a Fed easing on interest rates in the coming months. Current Fed funds were held steady at 1.2% after Tuesday's FOMC meeting, but the June Fed Funds futures, which had been forecasting a 100% chance of a Fed rate cut of 25 basis points by June have now lessened (100 - 98.83 = 1.17%) to approximately a 50% chance. It would be my thinking that this futures contract is starting to view the events in Iraq as giving a boost to the U.S. economy, and most likely being tied to a lifting of consumer confidence as the coalition looks to prevail.