As the ADP report showed private sector jobs gains of 135k, the market continues to digest its sentiment on how the Fed’s actions regarding QE will affect the economy and therefore stock market prices. The market is also looking forward to receiving the important monthly labor department jobs and unemployment data this Friday.
Equities: The JUN13 E-mini S&P 500 is trading down 9 points to 1622. Our key short term pivot level has moved down from 1652 to 1630. If this market can hold below 1630, we look for 1609 to be tested — a key support level. We have identified on the chart a very key longer term pivot level of 1595. If the market can test this level, we believe buyers will like to buy at this level.
Bonds: The bond market bears have received a lot of support recently not only from Warren Buffett and Bill Gross, both recently calling long term bonds a bad investment, but now Fed official Fisher stating that the 30-year bond bull market is over. The JUN13 U.S. 30-year bond futures are up 15 ticks to 141 18, and the MAR16 Eurodollar interest rate futures are up 4 ticks to 9867.5. The Eurodollars are at a key resistance level, and will likely make a big move one way or another on Friday after the jobs report is released. If the report is much more positive than expected, we expect Eurodollar and bond futures to go down in price.
Commodities: Gold is up $7 to $1,405, and crude oil is up 0.8% to $94.07, after a key supply report was released at 7:30am PST. Crude oil has been extremely resilient recently, and we would not be surprised to see the market continue to test higher levels. Gold, on the other hand, is still in a bearish technical environment in our view. Corn continues to trade with a very bullish, consistent tone, with JUL13 corn up 3 cents.
Currencies: The Aussie dollar has tanked this morning and last night on the heels of a lower than expected GDP print, combined with a dovish RBA statement that the currency is still overvalued. Our next downside level for the Aussie is 94.52. The yen is up 84 ticks today to 100.81, and the euro is up 15 ticks to 130.95. We hold very bullish views for the euro on a very short term basis. We believe the euro will test our first target at 131.45. The key ECB meeting tomorrow will of course have a key determining factor on the euro.
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