As the kick-off earnings report after the bell yesterday was neutral to positive (Alcoa matched EPS expectations but beat expectations on sales), the U.S. equity index futures are off to a positive start this morning. MAR13 E-mini S&P 500 futures are trading up 4.5 points, or .33%. The Dow Jones E-mini futures are trading up 76 points, or +.57%. The U.S. 30-year Treasury bond futures are having a quiet day, trading at unchanged levels from yesterday. The driving story now is corporate earnings. It feels like, to us, that the stock market is ripe for a big rally. It is still below 2012 highs and if we continue to see bullish earnings announcements, we will look for 1500 to be approached in Q1 for the S&P 500. This would likely, we believe, portend a bear move for the bond market.
The U.S. Dollar Index is in interesting territory at this point. Technically, we see the key support level of 79 holding up strongly. The FOMC minutes sentiment that QE3 may end this year has caused the currency markets to trade strongly around this news. We would not be surprised to see the U.S. dollar continue to rally off of the 79 level, and our next upside target is 82.50. If this scenario were to develop, we would look for the Euro currency futures to sell off to at least the 1.29 level.
In other commodities news, sugar futures have broken down below the key $0.19 level once again. Currently, sugar futures are trading at around $0.1856, and we believe they could head lower. Our longer term target is $0.1650.
Gold and silver futures are both down today. Silver futures are down .85%, or $0.26, while gold futures are down almost $5, or .28%. As we have noted previously, we believe gold will hold in a short-term trading range between $1,630 and $1,690. Technically, we believe silver is susceptible to another bear move down to the $27 level. If the U.S. dollar rallies to our target, we believe this will be a bearish force for the precious metals market.
We focus more on natural gas futures today. Natural gas is known to be a very volatile market. With warm winter temperatures not abating yet, the natural gas market has experienced some heavy selling over the past few sessions. It has recently broken through key support at $3.31, and is now down another $0.11 this morning, trading at $3.11. Our next technical target is $3.05. The $3.30 level has been key support for the FEB13 contract since March 2012, and the market has now broken that level. If this market keeps selling off, we see a potential congestion area at $2.75.
