Eastman Chemical and Herbalife each jumped 6.2% as earnings topped estimates. The Federal Open Market Committee starts a two-day meeting today.
Equities: The SEP13 E-mini Nasdaq did indeed make a new 2013 high this morning, trading up 22.75 points to 3088.25. Our next market profile target remains at 3103. We believe this target could be hit this week, especially if the Fed issues a particularly “dovish” statement tomorrow. The SEP13 E-mini S&P 500 (CME:ESU13) is lagging the Nasdaq this morning, trading up just 1.5 points to 1684. Even with this, we would not be surprised to see this market try to make another run to the 1700 level. We believe the Fed will be dovish on Wednesday with their language, potentially indicating that inflation is not a concern at all and that they will actually perhaps mention a concern of deflation. This would likely be very bullish news for the equity markets. Something that could cause the equity markets to really reverse course by the end of the week would be a very high GDP number tomorrow morning, and/or a very high jobs number on Friday morning.
Bonds: The SEP13 U.S. 30-year bond market (CBOT:ZBU13) is down 9 ticks to 133’28. This market is now below its key pivot level at 134’00. We believe in the longer term bearish story of the bond market, and believe that this market will experience some serious downside this week if this Friday’s jobs report comes out with a much higher jobs number than forecast. However, we also will be watching for a big short covering rally in bonds if we get a disappointing jobs or GDP number. Our key line in the sand level remains at 134, and 133’18 is a very important support level that has held up to multiple tests this month.
Commodities: Not many commodities are having excitingly bullish days today. Soybeans futures continue their descent today, with the NOV13 contract (CBOT:SX13) trading down $.12 to $12.08, approaching the key $12 level. We would not be surprised to see this level breached soon. AUG13 gold futures (COMEX:GCQ13) are down $5 to $1,324, but do seem very resilient. We would not be surprised to see gold rally tomorrow if Bernanke is very dovish, and especially if the morning GDP numbers are below expectations, thus potentially fueling speculation that the Fed will not reduce the stimulus in September. SEP13 Crude oil is down $1.68 to $102.87.
Currencies: The currencies will potentially see some big movement this week, as there are three central bank meetings to digest, starting with the U.S. FOMC statement tomorrow. The gauge of consumer sentiment for the European Union climbed from 91.3 in June to 92.5 in July – its best level since April of last year. The mortgage approvals data coming out of the UK was a downside surprise, thus fueling a 123 tick sell-off in the SEP13 Pound/USD. The inflation data recently released out of Germany also was slightly above forecasts, thus likely being supportive for the SEP13 Euro’s strength, pushing it above 1.33 before some profit-taking occurred. We believe the Euro will continue to be strong, and our key target at this point is 1.3388.