Gross domestic product expanded at a revised 1.8% annualized rate from January through March, down from a prior estimate of 2.4%. The People’s Bank of China indicated in a comment on their website that “tight liquidity situation will gradually ease,” which likely is another cause for the rally in equities.
Equities: The SEP13 E-mini S&P 500 futures are up 9 points this morning, trading up to 1590, after hitting a recent low in the low 1550s. The rally is likely due to today’s GDP, data which was under the consensus estimates, as well as the PBOC soothing markets with its comment regarding the tight liquidity situation easing. We believe the 1582 level is a key pivot/support level for this market. We have an upside target in the near term at 1607. 1590 is the high volume area for today and could serve as a magnet for the near term. We might have lower volatility over the next couple weeks headed into the important monthly jobs report. The market could gravitate toward the key 1600 area and wait for further cues.
Bonds: The 133’19 level in the SEP13 U.S. 30-year bond market has held nicely over the past few sessions, and today the new support level is 134’07. There still is a potentially bearish structure of the 30-year, so this could materialize if we get a big upside surprise in the July jobs report. For now, we believe the bond market may just move back and forth in a range. The 134’07 level is key. If the market can stay above this level, we look for a potential rally to the next key resistance level we have at 136’04. If the market stays below the level of 134’07, we look for the bearish structure to complete with a target of 132’24. We believe going forward this market will be very data dependent, as Bernanke has already said his peace to the markets.
Currencies: The U.S. Dollar Index is up to 83.16 today, or +.43%, as the overall trend of the dollar being looked at again as a safe haven continues, even in the face of weaker than expected U.S. GDP data. We look at 82 as a key support level for the USD, and 83.70 as a potential breakout area to the upside. Again, the theme going forward will be the key monthly data coming from the U.S. The euro is down 92 ticks this morning, as Draghi made dovish comments about monetary policy for the region. The euro, even with its strong rally from 130 to 134 before the FOMC statement, is now looking weak. There is a potential “head and shoulders” pattern on a longer term chart, with a potential downside completion point at 1.21, with 1.28 being a key support. We are not convinced this move will occur, but will watch the key levels and data coming out of Europe.
Commodities: Once again, our focus is gold. Gold is down big again today, trading down $42 to $1,232. Gold has hit our first key level of $1,242, and now we are focusing on our next downside target of $1,195. We do believe gold is susceptible to more selling, but we also would not be surprised to see some major short-covering/buying occur if gold gets below $1,200. Our key resistance level is $1,270. We do believe that in the near term, gold could gravitate toward its recent high volume level of $1,235, or slightly higher at $1,248. Crude oil is showing strength again, this time rallying up from the daily low of $93.68 all the way to $95.48. Our key level is $95, and if this market can hold strength, our next upside target is $96.88. We would not be surprised to see this get hit.
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