Federal Reserve Chairman Ben S. Bernanke called for maintaining accommodation in his talk yesterday, which had a fairly large impact on the major financial markets including the currencies. “Highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy,” Bernanke said yesterday in response to a question after a speech in Cambridge, Massachusetts.
Equities: The SEP13 E-mini S&P 500 is up 16 points today to 1665. This market has been on a tear recently, and is very close to the 1685 June high. We believe the market could be a bit over-extended and could pull back to the 1650 area before potentially making an attempt at new highs. We have 1664 as the key high volume area for the day and 1652 as the technical pivot. The market does seem to have a strong bullish undertone, so if anything this potential pullback could just be a pit stop on the potential road to 1700 and beyond. Bernanke talked up the markets solidly yesterday with his comment about extreme accommodation being necessary for the near term. We have a key support level on the market profile at 1644.
Bonds: The SEP13 U.S. 30-year bonds are up 27 ticks today, but actually down from the high made yesterday after Bernanke spoke. This tells us that the market isn’t quite convinced of the dovishness of Bernanke, it seems like Bernanke was trying hard to band-aid the recent uptick in yields by simply re-emphasizing that the Fed is not curtailing their stimulus yet, but still may do so in the future if the members see key consistent job gains. We still point to 133’16 as our key decision level. For now, this level could serve as a key support level, but if the bonds make a run below this level, we would not be surprised to see another leg down. Really, the incoming data on inflation and job growth will likely be pivotal in the future movement of the bond market.
Currencies: The currencies made incredible moves yesterday after Bernanke spoke. The euro and the Pound rallied hard, with the Euro moving up over 300 ticks and the Pound coming close to that move. Today, there is a slight retracement of that move, but the Euro is still up 158 ticks overall and the Pound is up 200 ticks. We have a key resistance area for the Pound in the mid 151.40′s. The US Dollar index gapped lower this morning, and is now trading down 105 ticks to 83.18. The support area for the US Dollar in our opinion is between 82.50 and 82.75. We still believe in the longer term uptrend potential for the US Dollar, and the incoming jobs and economic data will be very important.
Commodities: Crude oil is down about $2.00 today and Gold is up $32 to $1,280. $1,230 is our key pivot level for gold, and gold is well above this area today, finding buying interest especially after Bernanke spoke. We also have $1,225 as a support level, and if gold keeps rallying, we could see a move up to $1304. $1283 is the high volume area of today and could serve as a key directional pivot as well. Coffee futures are up 2 cents to $1.2375/lb as as Brazil, the world’s largest producer, negotiates farmer subsidies that will limit sales of surplus beans. We have a 1.2590 target for the SEP13 coffee futures contract.