The Institute for Supply Management’s manufacturing index increased to 50.9 in June from 49 a month earlier, and an additional report from the Commerce Department showed construction spending increased 0.5% in May. In Japan, the quarterly Tankan index showed positive sentiment (+4 from -8 in March) among large manufacturers for the first time in seven quarters.
Equities: The SEP13 E-mini S&P 500 is up 20.25 points today to 1619.50. With strong economic data coming from the USA, it looks like the bulls are starting to come back to the market looking for places to load up on the long side. We would not be surprised to see the market head higher this year. For the short term, we have our next market profile target at 1643, which is a very key resistance level. The target we are watching before that level is 1638. We also note a potential bullish technical pattern, a reverse head and shoulders. If this pattern completes, we look for the market to head to 1648. We believe that over the next 3-5 years, the market will head much higher, so therefore we view these dips the market has made recently as bullish set-ups. We believe the market may make a low velocity run to 2013 highs later this year.
Bonds: The bond market is very quiet during this holiday week, with the SEP13 U.S. 30-year bond futures trading down 4 ticks to 135’23. We believe the Friday jobs report will have a large impact on the interest rate markets. It’s one thing for Bernanke to telegraph potential slowing of the bond buying stimulus, it is even a potentially more powerful thing for the market to see the numbers to actually support this change. Thus we await the number on Friday to likely dictate the bond market’s action. We will closely watch the unemployment percent figure, which we know the Fed is closely watching as well. Over the medium to longer term, we believe the trend has been established in May towards higher yields and rates.
Currencies: The Aussie dollar has rebounded nicely from making a new 2013 low last Friday. Today, the Aussie is up 88 ticks to 91.95. This is in the middle of our key resistance zone of 91.80-92.00. The Aussie Central Bank makes an interest rate decision this week, and obviously this is a key event for the currency. If we see a surprise rate cut, we look for the Aussie to tumble. If the central bank is more bullish on the economy and leaves a smaller window for future rate cuts, we expect the Aussie will rally. However, from the central bank’s prior statement that they believe their currency is overvalued, we look for the statement to try to bring down the value of the Aussie dollar. The Euro currency seems to be supported by the key 1.30 level, and is now up 41 ticks to 130.64. Our line in the sand for this market is 130.36. We believe the Euro will rise to a key level of 131.52 in the near term.
Commodities: We have seen gold futures make a big rebound from the very brief dip below $1,200 last week. Today, AUG13 gold is up $35 to $1,259. $1,240 is a high volume level and this could act as a short term magnet. We also have $1,272 as a potential next target above the market. AUG13 crude oil futures are up $1.41 to $97.97. We have a near term upside target of $99.66 and support at $97.30. Crude has seemed very strong over the past month. Sugar is interesting because it rallied sharply on the USDA subsidy news, but now is down .29 to $16.63. Sugar is very close the 2013 lows right below 16.50. It could rebound and be attracted to the high volume level as of late at 16.90.