Automatic cuts in U.S. federal spending, half of which are in defense programs, went into effect March 1 following a congressional impasse. With this, the U.S. equity markets are hovering around unchanged levels. The MAR13 E-mini S&P 500 is trading at 1516, or just about unchanged from Friday’s close. The MAR13 U.S. 10-year note futures contract is also trading right at the unchanged level this morning. This is somewhat common barring any other unexpected events for a nonfarm payrolls week. On Friday, the BLS will announce the latest jobs and employment data for the U.S. economy.
We believe that with the current concern still paramount over the U.S. spending cuts as well as the resurfacing of the concerns about the Eurozone, focused on Italy, the equity markets will have a tough time sustaining a rally beyond 2013 highs over the very short term (30 days). We believe the market wants to see that the economy can withstand the spending cuts, so might be waiting another several months to see a consistent flurry of economic data before making another potential bull run in the equity markets.
Gold is now seeming to find value below the $1,600 level. Gold had a very volatile ending to February 2013, and now we believe gold will enter a short-term period of range trading. We still believe the overall tone of this market is bearish to neutral. Silver has still not hit our first downside target of $27.50, and we still think silver is headed there, so from here we believe silver is bearish.
We focus more on heating oil futures this morning. After a big run up in January and February of 2013, this market has virtually collapsed in the past two weeks, trading down from $3.23 to almost $2.90 this morning. We have a key first support at $2.90, then the next major level we are watching is $2.83. We believe the market will approach this level. Our first technical resistance level is at $2.98, where this market experienced major congestion last winter. $3.05 is our major pivot level over the longer term. If this market can stay below this level, we believe it could head lower than $2.83 into the $2.70′s, especially helped by the potential for the rising U.S. dollar trend to continue.
Click to enlarge.
