Are bonds poised to rally?

Citigroup rose 2.2% after second-quarter profit beat analysts’ estimates while retail sales rose less than projected in June. Manufacturing in the New York region expanded in July at the fastest pace in five months. China’s gross domestic product rose 7.5% in the April-to-June quarter, equaling the median forecast.

Equities: The market is up again today. The SEP13 E-mini S&P 500 (CME:ESU13) is up 5.25 points to 1675.50, and we have a short term target at 1679. However, the market still seems to be having a tough time generating strong buying interest at these levels, however, there is no big selling activity pushing it down either. Our key pivot area is 1673. If the market stays above this level, it could rally and possibly break the 1680 level. However, if the market rolls over through this level to the downside, we could see the market approach our key level of 1644. Right now the market has been rallying because of Bernanke’s recent dovish comments.

Bonds: The SEP13 30-year bond futures (CBOT:ZBU13) are up 22 ticks today to 134’20. We believe this bond futures market could be in for a short term rally to our market profile target of 135’20. The retail sales number came in slightly weaker, and this could be a short term bullish data point for the bonds, coupled with Bernanke’s recent dovish comments. Even though we believe the bonds could be headed lower over the longer term, we also believe the bonds could be in for a short-term rally.

Currencies: The U.S. Dollar Index (NYBOT:DXU13) is up slightly on the day, while the Euro and the Yen are both down. The Aussie dollar has had trouble sustaining a rally above 90, leading us to believe this market could head lower. We believe this currency could head to below 89 before any type of meaningful short-covering rally occurs. The Yen is down 55 ticks to 100.07. Our key pivot for this market is 100.75. If the Yen can rally above this level, we believe the Yen might see a good short covering rally to 103.00, as Japanese economic data has shown some promise as of late.

Commodities: AUG13 gold (COMEX:GCQ13) is up today to $1,282, staying above the $1,275 level and our key pivot for this month at $1,230. Gold is strong today likely due to the weaker than expected retail sales data from the USA. AUG13 crude oil is down slightly today, trading down $.38 to $105.57. We believe this market is taking a breather today but overall would not be surprised to see it approach the $110 level.

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About the Author
Anthony Lazzara

Anthony Lazzara, CEO of Newport Beach, Calif., commodities investment firm Lido Isle Advisors, spent 10 years as a trader and floor broker at the Chicago Board of Trade and Chicago Mercantile Exchange. Anthony has significant experience in the energy, fixed income, and equity futures markets. After being a long-time independent futures trader, Anthony saw a tremendous opportunity to educate investors on how to invest in professional traders. Anthony is now focused on his duty as CEO of Lido Isle Advisors.

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