As the Conference Board’s index of consumer confidence decreased to 58.6, the weakest since November 2011, the U.S. equity markets are still hovering near unchanged levels from yesterday. Recent major corporate earnings have been disappointing, such as those of Ford and VMware, but nevertheless, the overall tone of the equity markets seems very bullish. It seems to us that the market is now in a “breather” phase of its bullish disposition, and we expect the equity index futures to remain close to 1500 before the next big scheduled market event — the February release of employment data. We believe that if the employment percentage ticks down, and the non-farm payrolls number surprises to the upside, we might see a buying burst taking the MAR13 E-mini S&P 500 above and beyond the 1500 level. With this potentially occurring, we’ll look for the U.S. 10-year note and 30-year bond to move sharply lower, corresponding directly with how high the jobs number is.
Precious metals are in an interesting spot today, with both gold and silver bouncing back slightly from their recent decline. Silver futures are up 1.43% to $31.22, while gold futures are up .5% to $1,661. We have the key support level for gold at the $1,620 area. Gold and silver have stopped their slide on the Mark Carney news sinking into the markets that as the incoming BOE chair, he will not be afraid to utilize more easing power to stimulate the economy. Typically, interest rate easing can boost prices of precious metals. Even though the U.S. easing policies might wind down in the next 12 months, other central banks may just be getting started. With that said, we still believe that gold and silver are in bearish-neutral environment, and we think these markets will head lower if the U.S. equity market make another leg up in the recent rally.
We focus more on the wheat futures market today. Bullish corn fundamentals seem to be pulling wheat and soybeans higher today and same for yesterday. MAR13 Wheat found a recent bottom at $7.40, and has rallied all the way to $8.00 this month, and now is trading at $7.82. We believe wheat could continue to grind upwards, especially if corn keeps rallying. We see a potential congestion area for wheat at $8.10, and think wheat could indeed rally to this level in the next 60 days.
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