The Conference Board’s gauge of the outlook for the next three to six months climbed 0.6% last month after falling a revised 0.2% in March. Consumer confidence rose in May to the highest level in almost six years. The markets continue their trends today, namely: Stocks up, Bonds down, U.S. dollar up, Gold down.
Equities: The JUN13 E-mini S&P 500 continues to trade in a very bullish manner, trading up 8 points from yesterday’s close to current levels of 1655. We believe the market could continue higher and might find key resistance at 1665, or the mid-1660s. We would not be surprised to see a small pullback to the high 1630s sometime very soon. Overall, the bull market frenzy is picking up and we still believe the market will finish this year at 1690 or higher.
Bonds: With “Fedspeak” from various US Fed officials starting to get more hawkish, the bond market has taken clear notice and yields have started to tick higher. Today, the US 30yr bond (JUN13) is down over 1 point to 144 ’07. We still have our first key downside target at 141. We also are watching the MAR16 Eurodollar interest rate futures contract. We believe this market is highly susceptible to further downside action. It is trading at 9896.5 now, and our next key downside target is at 98.90 and then 98.84. If the markets continue to start to price in higher interest rates, or at least a slowing of the US stimulus program, this contract could trade a lot lower.
Commodities: Gold continues to trend downwards, trading down $25 to $1,362. We continue to have our first downside target at $1,340, but we would not be surprised for gold to head lower than that this year. We believe gold could easily approach $1,250 by end of year. Crude oil continues to reverse its recent down movement on anticipation that a growing global economy will exert more demand pressure on crude oil. It truly is a tug of war right now in crude oil, with one force being an abundant US supply, but the other force being a growing potential for demand as global growth emerges.
Currencies: The currency markets have truly been one of the big stories of May. The U.S. dollar rally has cause many key FX futures to slide significantly lower, namely the Yen, Euro, Pound, and Aussie Dollar. The Aussie Dollar found tremendous selling last week upon news that Soros and Druckenmiller were bearish. The Aussie continues to trade lower today to 97.16, down almost 100 ticks. The Yen, even after falling 3000 ticks, trades down 90 ticks today. The trend for the U.S. dollar has clearly been up.