Retailers dropped the most among 24 industries in the S&P 500, as American Eagle Outfitters Inc. slumped 15%. International Business Machines Corp. retreated 2.4%. The U.S. trade deficit narrowed more than forecast in June to the lowest level since October 2009.
Equities: The SEP13 E-mini S&P 500 futures (CME:ESU13) declined this morning from a blistering rally which surpassed 1700. This market is down 9.5 points to 1693, and our next key levels are 1685 and then 1670. We believe this market could be in the beginning stages of a short term decline to 1670, as the market prepares for a potential stimulus diminishing this year. Overall, the market still seems fairly strong, but at the same time, at levels close to 1700, when it started this year close to 1500, we believe this market is very susceptible to news or economic event to create a correction scenario of perhaps 2%-4%.
Bonds: The SEP13 30-year bond futures (CBOT:ZBU13) are down 8 ticks to 132’30. This market seems like it has very little buying interest, and it is below our key decision level of 134’00. It seems as though more than one Fed member has started to publicly talk about a potential diminishing of stimulus this year, and it seems as though the bond market is very heavy because of that. Our next downside target for this market is 132’04, and this is also a very important support zone for the bonds. If the bonds stay below this zone, we could see another big move down, possibly testing the 130 level. The counterpoint to this idea is that if the stock market sells off this fall, we could see a rally in bonds.
Commodities: DEC13 gold (COMEX:GCZ13) is down $20 to $1,283, a key market profile level. We believe gold still has a bearish tone to it. Major central banks such as the Fed, the BOJ and the ECB all are having surprisingly good economic data to digest, thus possibly causing the gold market to think that there is not additional stimulus to excite the gold bulls to buy. We would not be surprised to see gold make another run for the $1,200 level. The soybeans market has really been in a tremendous slide recently, and continues to head lower today, with the NOV13 contract trading down $.17 to $11.66. $11.40 and then $11.20 are our next key downside levels, with $11.61 serving as our short term market profile target below here.
Currencies: The SEP13 USD (NYBOT:DXU13) continues its slide, today trading down 30 ticks to 81.65. It is interesting because the bond market is also down, perhaps indicating investors are preparing for higher rates, yet the USD has not been able to stay on a bull trend since hitting a 2013 high of around 85. The SEP13 Euro futures seem to be very strong, trading up 48 ticks to 133.09 on positive economic data coming out of that region. The SEP13 Aussie is also up a lot, trading up 82 ticks to 89.69, a focus for us recently, the SEP13 Japanese Yen, is trading up 63 ticks to 102.37, possibly rallying into Thursday’s BOJ announcement. If the BOJ does not proclaim an addition to their stimulus, we could see a “pop” higher in the Yen futures.