As Chairman Bernanke stated in his highly watched testimony in Washington that the economic recovery would be hurt by early tightening and thus he will keep an accommodative policy for now, global equity markets had sharp rallies, and many foreign currencies continued their slide.
Equities: The JUN13 E-mini S&P 500 rallied quick and hard this morning to 1685 upon the market digesting Bernanke’s testimony. Now the market is up 12.50 points to 1678. We believe the market, so close to 1700 now, will likely approach and possibly hit this 1700 level somewhat soon. Our major target we have been focused on for a while has been 1690, and we are very close to that. The Japanese Nikkei is on a moonshot ride this month and year, and today is no different. The Nikkei futures are up 470 points to 15980.
Bonds: Even with Bernanke stating that the economy needs accommodative policy, the bonds are down today, with the JUN 10-year futures down 6.5 points to 131’22.5. The market will also be listening closely to the FOMC minutes release later today. It seems as though the overall pressure facing the bond market is indeed bearish, and especially if the stock market continues to march higher, we believe the bond market will head lower.
Currencies: The pound, the yen, and the Aussie are all down big today. Both the Aussie and the pound are down more than 100 ticks, and the yen is down 76 ticks. The U.S. dollar is continuing its rally even in the face of a dovish Bernanke, which is interesting. The euro spiked up to 130, but then immediately came back down and is now down 24 ticks on the day to 128.79. We could see the euro falling much more.
Commodities: Crude oil is down more than $1, while gold spiked up to $1,410, but then came right back down and is now trading at $1,377. We believe gold is headed lower, and anticipate a test of the $1,300 level in the medium term. We believe crude oil is headed lower this year as well, as supply figures seem very high.
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