The U.S. equity markets are experiencing a mild bounce after yesterday’s large sell off. The market awaits the FOMC comments which are scheduled for 2:15pm EST. Disappointing earnings reports have trumped continually upbeat housing numbers, bringing the S&P 500 futures almost below 1400. The markets never move in a straight line, so sell-offs in the midst of rallies and vice versa are to be expected, but this sell-off from 2012 high levels seems like it could be temporary and not the start of new longer term down move. With that said there is still sufficient geo-political risk variables to potentially keep stock bulls less aggressive than they might normally be with all the positive U.S. housing data coming out.
Crude oil futures continue their sell-off, trading down more than 1% this morning. Talk of more supply hitting the market is sending prices lower, as the Energy Department reported a big jump in U.S. oil inventories. We continue to have our next downside target at the $82 level. Natural Gas futures are also lower by around 2%, after a sharp rally above $3.
We focus on wheat futures today. Wheat is leading the way up in the grains markets today, trading up around 18 cents (+2.14%) thus far. This is a fundamentally driven rally as Ukraine’s agriculture minister in a Reuters report overnight confirmed the country will ban wheat exports starting Nov. 15. Our key pivot level for wheat futures (DEC 12) is $8.70. If wheat can hold above this key pivot level, we look for today’s bullish move to continue up to recent highs at the $9.60 level. The key psychological level of $10 is of course the next major level above that. We think the next major support level below our pivot is $7.80.
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