The Conference Board’s index rose to 68.1, exceeding the highest projection in a Bloomberg survey, from a revised 61. Residential real-estate prices increased in February by the most since May 2006. The ECB is expected to lower rates to 0.5% on May 2. We believe that the markets overall are anticipating major stimulus packages from key central banks around the world to support equity and risk-on markets, and the U.S. dollar may head lower.
Equities: The Nasdaq continues its relative strength this morning, trading up 8.5 points (JUN13), while the JUN13 E-mini S&P 500 trades down 1 point to 1587. We have extremely significant central bank data this week along with key U.S. employment data on Friday. It again looks as though the markets are starting to price in the effects of more easing by the ECB this week, and the massive stimulus efforts of Japan. We believe in the bullish story and tone of the equity markets. The key pivot level for today’s S&P 500 is 1585. If this market can stay above this level after tomorrow’s Fed announcement, we could see a large rally.
Bonds: The U.S. 30-year has been met with sellers each of the past two rallies over the past several days, and we believe that this market is stuck in a conundrum. We believe that if the U.S. data continues to be strong, the bond market will start to price in slightly higher rates. Employment data is key, especially the unemployment number. The Fed will try to verbally indicate low rates and stimulus for as long as they can, but it will be tough for them to argue with consistently improving labor conditions.
Currencies: Key currencies are rallying against the U.S. dollar, such as the euro, yen, pound and Aussie dollar. Perhaps the markets are indeed expecting a very dovish U.S. fed announcement tomorrow. We expect these rallies to pause or reverse course (except for the yen) if we get a big upside surprise in the jobs number on Friday.
Commodities: Gold is staying below the key $1,475 level, trading down to a low of $1,460 last night. We believe the $1,475-$1,500 area is a short- to medium-term ceiling for this market, and would not be surprised if gold approached $1,450 soon. We focus more on crude oil. Crude oil has turned back down from almost hitting the key level of $95. Today, this market is down around $1 to $93.50. Technically, we would not be surprised to see this market range-trade between $90 and $95. Upcoming supply data will likely sway this market.