Consumer spending and sales of existing homes jumped while jobless claims declined, and the S&P 500 is having its biggest three-day rally since January.
Equities: The SEP13 E-mini S&P 500 futures are trading up 16.5 points today to 1612. Our next short term target for this market is 1619, and our key support is 1596. 1596 is a high volume area as of late, so it could potentially attract the market. We believe in the longer term bullish story of the market, so if the market gets back down here, we could see buyers come in, very interested to buy this market below 1600. We would not be surprised to see this market make new highs in the next six months. Obviously, as always, the market will be closely watching the incoming economic data to see how the economy is responding in real-time as interest rates are beginning to rise.
Bonds: The SEP13 U.S. 30-year bond futures are up 8 ticks today, but were met with strong selling at the highs, showing us that this market still has important selling pressure. Our key support level still is the 133’19 area, but if the market gets below here, we could see some new selling interest. Overall, this still could be the beginning of a trend of higher interest rates/yields. Again, we believe this market will be very dependent on the U.S. data coming in, such as the July non-farm payrolls report. If this number comes in a lot lower than expected, we look for a big short covering rally in the bond market. However, if it comes in higher than expected, we expect the bond market to have a big sell-off, as that could be further confirmation that the Fed is ready to curtail the stimulus, as the Fed closely watches the monthly jobs and unemployment figures.
Commodities: Even after another big sell-off yesterday, the gold market has not been able to find buyers this morning. Gold is down very slightly to $1,228. We have a high-volume area at $1,230, and this level is our key line in the sand. If gold has trouble staying below $1,230, we look for some short-term buying to take place, possibly taking the market up to $1,248, possibly $1,260. However, even at this point, we believe the market is still more susceptible to downside price action, and our next target below here at this point is $1,183. If gold does reach this area, we would not be surprised to see a big short covering rally. Natural gas is also down big today (-3%) after a report from the U.S. Energy Information Administration showed that natural gas supplies rose more-than-expected last week.
Currencies: The U.S. Dollar Index continues its bullish trading today, trading up .15 to 83.375. We believe we are in a trend of U.S. dollar strength, and would not be surprised to see the move up continue. The euro currency is trading up 6 ticks to 130.14, and is hovering around the key 130 level. We believe the euro might be in oversold conditions, but at the same time there is a technical pattern on the longer term weekly euro chart that indicates the currency has potential to have a big fall to the low 1.20s. The British pound is down 89 ticks today as the National Office of Statistics released information on the gross domestic product that reported growth of just 0.3% in the first quarter of 2013. Our key resistance level is 1.53, and our next short term target on the downside is 1.5138. Fundamentally, this currency is down because the market seems like it thinks the BOE might be more dovish in its future monetary policy to try to stimulate the GDP.
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