A Chinese cash-crunch concern is really hitting markets today, as Chinese officials indicated that the era of easy, cheap credit is over. Bank of America Corp. and Citigroup Inc. slid more than 2.8% as banks tumbled. The Chinese central bank has refrained from using open-market operations to ease the cash crunch. Combined with the concern over the U.S. Fed’s potential tapering of stimulus, the markets have a lot of potentially bearish news they are trading today.
Equities: The SEP13 E-mini S&P 500 is below a key volume pivot of 1577, and is now down 25 points to 1559. Our next key technical target is 1546. The markets are trading down on heavy momentum selling, and we could potentially see more downside trading from here, however, we believe the markets might find selling exhaustion very soon and rotate back up to 1565. The market seems to be forgetting the strengthening U.S. economy and just focusing on the China news this morning.
Bonds: The bond market and Eurodollar market are continuing their recent trend of higher yields this morning. The SEP13 U.S. 30-year bond futures are down 1’09 points to 133’24. We have a key short term magnet level at 133’31, and a potential short term buying zone starting below 133’19. The bonds have gone very far, very fast, and as the stocks go down, we might see some short term reversal in the bond markets. The MAR16 Eurodollar futures are down 13 ticks to 9800.5, and we have our next key downside target/level at 9788. If the market does get down to this level, we believe it will be overextended and could see some buyers bring it higher.
Currencies: The overall trend of U.S. dollar strength seems to be continuing, with the euro and British pound trading down today. The yen and the Aussie are both up, with the yen up 24 ticks and the Aussie up 4 ticks. The Aussie bounced off a key level of 91.00. We have a key market profile pivot level of 91.40 for the Aussie. This is our line in the sand level. If the Aussie can stay above here, it could make a run into the mid 92′s. The Euro is down 37 ticks to 131.09. Even with the recent correction in the Euro, we believe the Euro is still more stable than it has been over the past couple of years, and believe it could be searching for a base around these levels. Our pivot level is 131.10, and there seems to be a short term bullish structure, with a near term target of 131.66.
Commodities: Gold is down $9 today to $1,283. We have key resistance at $1,292, and two downside targets of $1,264 and $1,242. We believe gold could head to these targets. The grain markets have taken a hit today as well, with DEC13 corn trading down $0.11 and JUL13 wheat down $0.16. It seems as though outside markets are taking a toll on the grains, combined with the China news, as China is a very large consumer of grain products.
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