JPMorgan Chase & Co. dropped 0.7% while Tesla Motors Inc. fell 3.8% in Monday morning trading. Key data for this week include retail sales, PPI and CPI, industrial production and housing starts.
Equities: The SEP13 E-mini S&P 500 (CME:ESU13) has reversed early morning losses and is now trading up 1.25 points to 1687.50. We continue to watch 1687 as our key pivot level for this market. This market has not touched any significant downside targets in our view, thus might still be susceptible to a down move to 1670. However, buyers seem to find prices below 1680 appealing, so we will see how the forthcoming data this week affects the market. We believe the CPI number will be closely watched. If the core CPI number comes out anything above the forecast, we may see renewed selling interest in the equities as the market focuses on a September tapering announcement. We believe something similar might happen tomorrow if a strong retail sales number is released.
Bonds: The SEP13 U.S. 30-year bonds (CBOT:ZBU13) are up 7 ticks to 134’21. We have a next upside target at 135’22. We believe this could especially occur if we get a weak retail sales number tomorrow. However, we believe tomorrow’s number has a higher likelihood of beating expectations because of recent economic strength as shown by GDP, payrolls data and housing. Overall, we believe the bonds have come down quite a bit in expectations of a fall Fed tapering, and could be in a mode of rallying until gaining more clarity as to the Fed’s schedule of stimulus reduction. We believe 135’22 will attract this market.
Currencies: The SEP13 U.S. Dollar Index futures (NYBOT:DXU13) had a nice rally to 81.55 overnight, but have recently come down to the 81.35 level, still up about 20 ticks on the day. We have 81.38 as a key pivot. If the USD can stay above this level, we believe the next key upside target is 81.75, which could very well be hit on a strong retail sales # tomorrow morning. The major foreign currencies such as the Euro, Pound, and Yen are all down this morning, but have reversed some overnight losses. We believe the SEP13 Yen’s recent rally is not necessarily complete, and we could see some further upside action testing 105. The SEP13 Euro futures have tested below an important support level of 133.00, and have bounced back above this level this morning. We believe tomorrow’s data out of the US and tonight’s data out of Europe will be key in determining the Euro’s short term direction – back up to 1.34 or down to 1.32?
Commodities: DEC13 gold futures (COMEX:GCZ13) have staged an impressive rally this morning up to $1,340. We have our next key resistance level at $1,360, then a very key level at $1,420. We believe the immediate future of gold will be dictated by what the market thinks the Fed will do. Gold could indeed rally further up to $1,375 if this week’s inflation data comes in at or below expectations. For now, it seems that a bottom for gold has been put in place this year, anything can happen in the markets though. Regarding grains, there will be an important USDA report this morning, but NOV13 soybean futures (CBOT:SX13) are rallying in front of this report, up $.22 to $12.04. SEP13 crude oil dipped overnight, but is rallying back close to the $106 level. We believe this market is very susceptible to further upside, potentially soon approaching the $110 level, possibly higher.