Caterpillar slipped 1.6% after cutting its forecast, while Apple rallied 5.7% after revenue and sales topped forecasts. New U.S. home sales vaulted to a five-year high in June.
Equities: The SEP13 E-mini S&P 500 (CME:ESU13) is down 6.75 points today to 1681.50. This market is below our key short term decision level at 1685. We have a short term downside target at 1675, which we believe could be hit very soon as the market starts to digest the very positive new home sales data as a possible catalyst for the Fed to remove some of the stimulus it has been putting into the market. We would not be surprised to see some selling momentum bring this market down to 1660.
Bonds: The SEP13 30-year bonds (CBOT:ZBU13) are down 1 point today on strong U.S. new home sales data. This market is approaching one of our key levels at 133’16. Really, we think the bond market is extremely sensitive to data such as this morning’s. If we keep getting more data that point to a strong U.S. economy, the bond market may start to try to get in front of a potential official announcement of tapering. The next key data release is the first week in August, when we see the monthly non-farm payrolls report along with the unemployment rate.
Currencies: The SEP13 U.S. Dollar Index (NYBOT:DXU13) futures have found some support at the 82 level, and today this market is trading up 24 ticks to 82.28. Again, we believe this is because of the very strong U.S. new home sales data. If the market starts to price in a tapering happening this year, we could be in for a large U.S. dollar rally back to the 85 level, which it last hit earlier this month. The Aussie dollar is down 121 ticks to 91.40. It is trading below a key decision level at 92.60. HSBC’s China flash PMI hitting an 11- month low is the likely culprit for the Aussie’s big drop overnight and this morning.
Commodities: AUG13 (COMEX:GCQ13) gold looks like it made a big short covering rally this week all the way up to $1,348 yesterday, but from that high is down about $20 to $1,327 today. We believe gold may be in a range trade for the short term, with a potentially limited upside barrier at $1,400 and a potential downside barrier at $1,300. SEP13 crude oil has had a lot of selling today, trading down $1.88 to$105.34. We believe this is due to a fear of early stimulus tapering. At the same time, the longer term momentum still seems like it could be bullish, so we look for a support level at $103.50 to potentially hold.