Fed Bank of Cleveland President Sandra Pianalto said yesterday there had been “meaningful improvement” in the labor market and a scaling back of stimulus may be warranted if it continues. Also, claims for U.S. unemployment benefits in the four weeks ended Aug. 3 declined to 335,500 on average, prompting further confidence in the prospect of jobs growth. Another important report showed that China’s exports and imports exceeded economists’ forecasts.
Equities: The SEP13 E-mini S&P 500 (CME:ESU13) is down 1 point to 1687.25, while the SEP13 E-mini Nasdaq is up 5.25 points to 3121.50. We believe the E-mini S&P 500 could be susceptible to more selling, with a next downside target coming in at 1677. Our key pivot level for the short term is 1687. If the market can’t stay above this level, we look for more of a down move to occur to 1677, and possibly lower. We believe the positive jobless claims data that came in this morning actually was negative for the stock market as it probably is causing the market to think the Fed may reduce their stimulus later this year as jobs growth is showing positive signs.
Bonds: The SEP13 US 30-year bond futures (CBOT:ZBU13) are up again today, trading up 18 ticks to 134’14. We believe this is mainly due to weakness in equities. The key level for this market in our view continues to be 133’18, and the market is now almost 1 point above this level. If the equities continue to show weakness, the bonds could rally further to 136. We believe this is a period in the markets where there might be a lot of low volume, sideways action, as the market prepares for concrete news on when the current Fed stimulus will be reduced and by what amount.
Currencies: The SEP13 Aussie dollar (CME:A6U13) is up 127 ticks to 90.93, likely due to positive Chinese trade data. The Aussie looked to be in a free-fall recently as it broke the 90 level, but quickly recovered. The SEP 13 Japanese Yen futures (CME:J6U13) continue to bulldoze higher, trading up 47 ticks to 104.25. The BOJ announced last night that they will not add new stimulus, thus propelling the Yen higher. Our next key target for the Yen futures is 106.50.
Commodities: DEC13 gold futures (COMEX:GCZ13) are up $22 to $1,307, spending little time below the key $1,283 support level. We believe gold could continue to rally and test the recent high area of $1,350. SEP13 Copper futures are up $.086 to $3.26/lb, as positive Chinese data incited a rally in this market. Our next upside target is $3.40. OCT13 Nat. gas had a significant dip to $3.15 this morning, but rallied all the way back to unchanged levels at $3.27. NOV13 soybean futures have found buyers after a recent heavy slide, trading up $.15 today to $11.81.