Stock markets and foreign currency markets are enjoying the just-released non-farm payrolls report, as the S&P futures are approaching their recent September highs and the US dollar index is holding below its key level of 80. The lowest unemployment rate since Obama took the presidency is highly significant, as we feel this might contribute to a further confidence boost in the forward looking nature of the markets, and propel the S&P 500 to our previously stated technical target of 1530. The S&P 500 is holding strong above our key pivot level of 1430, and now with the payrolls number out in a positive way, might induce more buyers to come in the market to get in before the key psychological level of 1500 is potentially touched.
For the bond markets, today’s jobs and unemployment number is highly significant. If the equity markets experience a sort of blast off period over the next few months and the S&P 500 races above and beyond 1500, we anticipate the bond markets of the US to price in higher interest rates sooner than the market had expected just a few days ago, and thus we look for lower prices on the 30 and 10 year bond futures. We notice on the charts that the 30-year bond future is in a downward channel, and prices got knocked back quickly once they reached the upper channel line just a few days ago. 145 is our next downside level we look to be approached, and if the bonds can hold below this level, we are viewing the next downside target to be 140. This may look like a large move from these levels, but with prices at such elevated levels (historically speaking), we believe this may occur, especially if equity markets continue to rally and housing and jobs #’s continue to outperform expectations. To summarize, 145 is our key long term pivot level for the 30 yr bond futures. Price may consolidate at this level, but if it can build value below this key level, we look for an extended move lower.