The S&P 500 has fallen 1.6% from a record high on May 21, as the market awaits the Fed statement and Bernanke press conference tomorrow. Housing starts climbed 6.8% in May to a 914,000 annualized rate after a revised 856,000 pace in April. A separate report showed the cost of living in the U.S. rose less than forecast in May.
Equities: The SEP13 E-mini S&P 500 has looked very bullish over the past few sessions, as upbeat economic data has affirmed a bullish tone for investors, even in the face of more “tapering” talk in the markets. The market is up 8.75 points today to 1642.50. Our key short term market profile level is 1639. Our short term upside target is 1655. It seems as though the market, even with the “uncertainty” over the Fed’s tapering intentions, the market still has a very bullish tone. We would not be surprised to see the market approach 1665, another key profile target. Of course, tomorrow’s statement and press conference will likely have a big impact on short term direction.
Bonds: The bond market was weak overnight in front of the economic data this morning, but prices have recovered slightly this morning. The SEP13 30-year bond futures are still down 8 ticks to 139’09. This market is slightly below our key pivot of 139’12, and thus we believe if this market stays below here we could see another leg down soon, especially if Bernanke mentions considering tapering this year. We are also tracking the MAR16 Eurodollar interest rate futures. Today this market is down 3 ticks to 9862. It is below a key level of 9868, and we would not be surprised to see this market make a big move lower over the next several months, again, especially if the Fed is more hawkish on tapering tomorrow.
Currencies: The euro currency continues its very bullish trade, today trading up 67 ticks to 134.16. 133.40 is a big market profile level, and can serve as a support level for the euro. Our near term target for the euro is 134.50. The Aussie dollar is down 38 ticks today to 94.28. It seems as though the Aussie is at the mercy of the central bank’s statements on their opinion that the Aussie is still overvalued. We would not be surprised to see this currency head lower.
Commodities: Gold is now down $19 on the morning to $1,363. We believe that gold continues to be in a very bearish technical environment, and our next market profile target to the downside is $1,348. We would not be surprised to see gold make new lows for the year and head below $1300. Natural gas has rebounded nicely this week, with JUL13 NG trading up $.07 to $3.95. We detect a potential reverse head & shoulders pattern in this market, with a first price target at $4.03.