Equities: The S&P 500 has dropped 3.2 percent since reaching an all- time high of 1,593.37 on April 11. We believe the SP 500 is in a corrective phase from hitting a recent high of 1593. We continue to hold our next downside target at the 1523 level. As recent earnings reports have come in underwhelming the bulls and giving bears and profit-takers reasons to sell, we see some bearish ideas starting to develop in the stock market, such as slowing Chinese growth. However, we do not think this is a major turn, but more of a correction on the upward track. It will be interesting to see how the market does in May, which is a notoriously bearish month.
Bonds: The US 10yr note futures are trading at unchanged levels today, and hovering near all-time low yield levels. We believe this market will be very dependent on US economic data in the near future. If the key unemployment and jobs data start to really underperform, we could see another rally in bond prices. We do not believe the bonds are in a bubble environment. We believe the Fed’s policies have incredible influence on this market. If the jobs data comes out above the estimates through the summer, we could start to see more bearish sentiment take hold of the bonds.
Currencies: The Yen rallied to 1.04 recently as the gold market dropped $150 on Monday, and now the Yen is back in the middle of the range of 100 to 104. We believe the Yen will continue to consolidate short term. Both the Euro and the British Pound are having rallies today, but we believe these markets are more likely to go down than up. We believe this is a short term correction in the US equity markets, which is US dollar negative and therefore foreign currency positive. We do not believe this will last, especially as the economic data from the UK and Europe has not been impressive just yet. We believe the Euro will be range-bound to bearish, and we think the Pound will hold under 1.54.
Commodities: After a massive sell-off on Monday, gold and silver are stabilizing, with silver down $.15 and gold up $11 to $1393. We think this stabilization will be the theme for the near term in gold and silver. Natural Gas is having a monster day today, trading up %4 to $4.38. Natural gas has been trading with great bullishness, and we believe that this market could rally further. We think there may be some good resistance and profit-taking at $4.60. Corn futures are down $.15 today to $6.45. The key level for this market is $6.60. We believe that corn is headed lower to $6, based off big recent supply data coupled with a potential correction in risk-on assets going into the summer.
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