Most futures markets are quiet this Monday, with this being the last week before Christmas. Typically, markets get very quiet during holiday periods and traders take more time off during this time of year. The U.S. equity indexes are slightly up, with the DEC12 E-mini S&P 500 futures leading the way at +7 points, or .49%. The S&P 500 is trading at 14.5 times reported earnings, compared with the average of 16.4 since 1954, data compiled by Bloomberg show. Thus, historically low P/E ratios combined with global monetary easing is driving the bull camp, while concerns of a fiscal cliff induced growth-halt are driving the bears to sell. The bears have won the tug of war over the past couple of weeks, but if a deal is struck and U.S. economic data keeps surprising to the upside, we could see a post-Christmas rally.
In energy news, crude oil continues its bullish turnaround over the past few sessions. As of now crude is trading up 71 cents, or .82%. It seems as though the $85-86 level has been a key support area for this market. Even with talk of growing supplies, crude has still managed to halt its recent decline and find some buying. We have the $88 and $92 levels as key resistance areas. We still believe crude is fundamentally in a bearish environment, and thus our first downside target for this market remains at $82. Heating oil futures have not been able to rally up through the key $3 level. We see the $2.95 level as being very important. This is the base that was built in November. The market is struggling to find a real direction recently, and we would not be surprised to see heating oil continue in a range between $2.90 and $3.10 for the near term.
Gold futures are staying below $1,700, and we believe gold looks to head lower toward the New Year. We could see gold testing the key $1,630 level before long. We believe all of the QE buying from the bulls is already priced into the market and now if we truly see a risk-on rally, gold could fall.
We focus on Natural Gas futures for you today. JAN 13 Natural gas has had a significant sell off from November highs above $4. This has been due to fundamental forces of warmer weather forecasts for the winter, thus potentially limiting the demand for natural gas. However, we believe natural gas is just coming out of oversold conditions and will stay above $3.20.
Click to enlarge.