The Institute for Supply Management’s May report showed manufacturing unexpectedly contracted in May at the fastest pace in four years. The S&P 500 declined 1.1% last week.
Equities: The JUN13 E-mini S&P 500 has gone down this morning to start off the week. This market is trading down 6 points to 1623, and we believe the correction story could continue, especially with today’s lackluster manufacturing data. Our next target for this market is 1604. A key level below 1604 is 1595. We believe if the market gets to 1595, it will be strongly supported. On the upside, our key pivot level is 1652.
Bonds: Bonds have reversed course this morning from their May downtrend, with the U.S. JUN13 30-year futures up 1 point to 142’03. We could see some sort of short term correction buying activity, but overall we believe the bonds have still established a bearish environment, and we believe the bonds could head lower this year, especially if supported by very strong U.S. employment numbers. We continue to watch the MAR16 eurodollar interest rate futures as an indication for what the market believes about short term interest rate direction. This contract is up 7.5 points to 9869. Our key upside resistance is 9882, and our longer term downside target is 9842.
Commodities: On weak U.S. manufacturing data, some key commodities are positive today, likely because of the market reconsidering QE ending soon. Gold is up $20 to $1,413, and crude oil (JUL13) is up $1.48 to $93.44. Soybeans have also been on a tear, with JUL13 soybeans trading up $0.20 to $15.30.
Currencies: The story today is U.S. dollar weakness. The Aussie dollar is leading the pack, trading up 177 ticks to 97.40. The yen is also very strong today, trading up 145 ticks. The euro is up 102 ticks. U.S. dollar weakness over the next week will likely be strongly impacted by the U.S. employment numbers coming out this Friday.
Click to enlarge.