The House of Representatives passed a bill just after 11 p.m. in Washington yesterday by a vote of 257-167, undoing income tax increases for more than 99% of households. With this news alone, the equity markets around the world have experienced quite significant rallies today. For example, the MAR 13 E-mini S&P 500 futures are trading up around 25 points, or 1.74%, from Monday’s close. Since hitting a recent low below 1390 just last week, this market has turned around in an extremely quick fashion, and we continue to expect this market to rally to at least 1500 in the first quarter. The Nikkei has also been a tremendous rally story, trading up more than 2000 points since just mid-November. The E-mini Nasdaq, which we will discuss in greater detail, is up a whopping 65 points today, trading at around 2720.
Conversely, the U.S. bond futures have taken a tumble today in increased confidence that the U.S. economy will perform well with the fiscal deal signed last night. The U.S. 30-year bond futures sold off today and are trading down around 1.7%. We believe the bond market has a potential to head much lower from here. Our next downside target is 141.
Precious metals are also rebounding today, likely on the idea that individuals will have more income and capital to deploy in investments, thus potentially fueling more precious metals demand. Gold futures are up around $12, or .87%, while silver futures are back up above $30, trading up a large 2.42%.
The Nikkei and the yen are still major stories of the markets, with the yen experiencing a major downtrend since September 2012. With the easy money policies of Japan continuing, the Nikkei has rallied more than 2000 points in just a few months, while the yen has dropped from 1.29 to 1.15 in the past five months. We have 1.20 as a key resistance level.
The grains futures markets are also continuing their recent weakness. MAR 13 corn futures popped above $7, but are now back below that key level, trading at $6.91 now, or down 7 cents. Our key level for corn is $6.80. We believe corn will test this key level, and possibly trade below that level. $6.60 is our next key support below that.
We focus more on analyzing the MAR13 E-mini Nasdaq futures for you. As we noted, the Nasdaq is rallying big today, trading up around 65 points. We have a very bullish view on U.S. equity futures indexes with the budget/tax deal being signed. Technically, the MAR13 E-mini Nasdaq futures rallied around 400 points from their summer low to their high in September. We sense another potential low has formed in November. If this is true, and the markets continue in their rally mode, we have our target at 2900 for the Nasdaq. This is our first target and not a final target. This projection comes from adding 400 points to the low point in November, which was approximately 2500.
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