Builders broke ground on 917,000 homes at an annual rate, up 0.8% from a revised 910,000 pace in January that was higher than initially estimated, the Commerce Department reported today in Washington. Furthermore, building permits advanced 4.6% to 946,000, the strongest since June 2008.
Even with the recent controversy of the potential one-time levy on bank deposits in Cyprus, the U.S. equity markets have more or less shrugged off this event to continue to trade near 2013 highs. The initial reaction upon this news hitting the wires Sunday night was a quick sell-off of the U.S. stock markets, but upon further consideration of the scope and potential impact, market retraced much of the initial losses. Today, with more positive housing data hitting the markets, the JUN13 E-mini S&P 500 is trading at unchanged levels from yesterday at 1546.75.
The other important fundamental news item to hit markets this week is the FOMC meeting today and tomorrow, with the policy decision and conference occurring tomorrow. We believe that the markets already have priced in QE not being curtailed this year, so we are not sure how much of a rally or pop U.S. equity markets will get, even on a dovish statement. If anything this could be a “sell the fact” scenario where profit taking occurs no matter what tomorrow. We shall wait and see.
Gold has been rallying over the past few days, likely because of the increased concern over the Euro region, exacerbated by the Cyprus bank levy situation. At the same time, we still believe gold’s major bull run will not continue this year. We believe gold is in a bearish to neutral environment, and our key resistance level is at $1,630.
We focus more on corn futures (MAY13) today. It seems concern that increasing global demand might outstrip supply has been pushing this market higher recently. The U.S. Department of Agriculture said last week that U.S. stockpiles before the next harvest will total 632 million bushels, the lowest level in 17 years. Corn has been in a nice uptrend all month, and we believe it may continue until hitting our first level of $7.32. This was a congestion level in January 2013, and we think if corn rallies more, it may slow down there. Our next key resistance level above that is $7.47. Our first key support for corn is the $7.10 level.
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