All 10 groups in the SP 500 index are declining today, as the market shows more concern over a slowdown in China combined with a potentially soon slowing of the Federal Reserves’ stimulus program.
Equities: The JUN13 E-mini S&P 500 futures are down 10 points today to 1645. Our key pivot level for this market is 1652. If this market stays below this level, we could see another approach of 1632, and possibly lower if the market really gets into profit taking mode on fears that the Fed removing some stimulus may slow down the economy. Overall, it seems that the fundamentals of lowering unemployment and strong housing growth are still in place which generally is a good sign for the economy, but in the mid to high 1600s for the S&P 500, we may not see the buying interest that was present during the run up to these levels.
Bonds: The U.S. bond market has had a massive slide this month, and today the U.S. 10-year note futures are down again, today trading down 6 ticks. The bond market has gone down quite a bit, and now that the stock market has started to retrace some gains, we may see some bond buying resurface, if even for the short term. Overall, we believe the bond market could even head lower from here overall, and would not be surprised to see a big move lower if the next U.S. jobs report is very strong, especially if the unemployment rate ticks lower by over .1%.
Currencies: The U.S. dollar is retracing a small amount of its recent rally, and both the Euro, Pound and Yen are rallying today. The Yen is above its very important support level of 97.50, and now is up 115 ticks to 99.13. We would not be surprised to see the Yen test the 100 level. The Euro is staying below its key level of 1.30, and we await the next key day for the Euro next week when the ECB meets.
Commodities: Crude oil is down $1.41 today, and it is very close to a very key pivot level of $93.57. If this market can stay below $93.57, we expect it to decline to $91.20, and perhaps lower after. Crude has had trouble staying above $95 and it is starting to look bearish to us. Gold is in a tight range, trading up $8 to $1,386. We believe gold could gradually head lower from here.