Equities: The JUN13 E-mini S&P 500 is up 7.5 points this morning on renewed optimism that the Fed will continue its stimulus policy, especially in light of recent weak U.S. manufacturing data. The market is still below our key level of 1652, and this market hit a very key support level recently of 1621. We believe it will take a strong amount of positive economic data to drive the market to new highs. The market is in a conundrum now, because even if the economic numbers are very strong in the near future, that could mean the Fed will taper stimulus and thus potentially temporarily hurt the stock market. Overall, we still believe this is a bull market, and if the market gets below 1600, we believe buyers will come out in force.
Bonds: The bond market has exhibited consistent weakness starting at the beginning of May. Today, the JUL13 30-year bond futures are down 16 ticks to 140.26. The MAR16 Eurodollars are down 2 points to 9862. The Eurodollars are holding below our key pivot level of 9868. We believe in the bearish bond story, and we think this Eurodollar contract is headed lower. This Friday’s nonfarm payrolls report will likely be pivotal in the short term movement of the bond and Eurodollar markets. If the number comes out very strong, we look for our MAR16 Eurodollar target of 9842 to be hit or approached.
Commodities: Crude oil seems to be in a bearish to neutral environment, having trouble holding above $94. We do believe this market is headed lower to the support level of $88. Gold is also hovering right around the $1,400 level, trading down $15 today to $1,396. Again, we also think that gold is headed lower in the future, as at some point the Fed will likely officially taper the QE program, and on or right before that announcement comes, the gold market could fall hard. We see it headed below $1,300 before $1,500.
Currencies: We focus on the Japanese yen. The yen had a big short covering move yesterday, rallying all the way up to right above 101. Today, it is down 84 ticks to 99.73. Overall, we believe the yen could test its lows below 97, as the BOJ is exhibiting an extremely dovish tone. The Aussie dollar is down 111 ticks today after trading up over %2 yesterday. The Australian Central Bank kept rates on hold last night, but had dovish comments, thus causing the selloff in the Aussie. We believe the Aussie is in a neutral tone right now, and will perhaps head higher to at least 96.85, a key chart level.
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