After housing starts and earnings from two major companies, Coca-Cola Co. and Johnson & Johnson, beat estimates, we are seeing the stock market having a solid rebound in trading today.
Equity: The S&P futures are up a good 20 points from yesterday’s close, trading at 1563.75. Its daily pivot level is 1554.75, so we are seeing this intraday price action is bullish for the very short term. We still contend that the market made its medium term high at 1593, and may bounce back and forth below that high for the rest of the month. If China puts out more underwhelming economic data, we look for both equity and commodity markets to fall further.
Bonds: The US 10-year note, surprisingly, did not have a huge rally yesterday to match such a huge sell-off in gold and the stock market to a lesser degree. Perhaps this indicates yields don’t have too much room to fall below these levels. The 133’10 level looks to be initial resistance, while our first key support level below today’s price is 131’22. We believe what will drive this market going forward is U.S. economic data. If key metrics such as housing numbers, CPI, and unemployment levels start to look like they warrant a less accommodative Fed, we could see yields start to hold above 2%.
Commodities: After a truly historic, massive sell-off in gold and silver yesterday, we are seeing bargain hunters (and possibly short covering) impact today’s trading. Gold is up $18 to $1,378, while silver is up $0.19 to $23.55. We believe gold is still in a slightly bearish short term environment, due to momentum if nothing else. However, we believe gold will stabilize around these levels for the short term. We don’t think gold will stay above $1,500 for a while. Crude oil is down slightly today, trading down $0.63, or -.72%. We believe in the downside story in crude oil due to supply as well underwhelming China economic numbers. Our next target for crude is $82.
Focus: Natural gas has had a strong run up to almost $4.30, and has since sold off to around $4.10. It is trading under its daily pivot level of $4.17, and we believe that the market is susceptible to very short term profit-taking/liquidation. We still believe the fundamentals of this market are strong for prices to continue to rise, but we may end up seeing a brief sell-off before that happens. To us, the $4.06 level is very important. If the market can stay above this level, we look for the $4.30 high to be retested and possibly breached.