Best Buy Co. rallied 9.8% after posting quarterly sales that exceeded projections., while Zillow Inc. dropped 3.7% after the operator of the largest U.S. real-estate website announced a share sale. U.S. central bankers meet in Jackson Hole, Wyoming this week to discuss monetary policy. The dollar extended a drop against the majority of its most-traded peers.
Equities: The SEP13 E-mini S&P 500 (CME:ESU13) proceeded to sell-off overnight into the early morning to our very key level of 1644,but once puncturing below that level, buyers came in and now this market is trading up 10.25 points to 1655.25. The market got into some momentum selling over the past few sessions and now is reversing before the two key events of this week: tomorrow’s FOMC minutes and the Jackson Hole central banker meeting. Also helping this market rally today are upbeat reports from key retailers such as Best Buy. We believe the 1644 level is very important for this market, and as of now might be good support.
Bonds: The SEP13 U.S. 30-year bonds (CBOT:ZBU13) did rally overnight to 131’13, and is up 22 ticks on the day to 131’02. We believe the bonds were at oversold levels on the short term, and this rally was due to that technical circumstance but also due to potential short-covering in front of this week’s two key info releases focusing on the U.S. central bank’s ideas on policy. Overall, when looking at a 30-year bond chart going back to 1990, we believe a case can be made to see the bonds head much lower over the longer term.
Commodities: The soybeans spread (NOV13 and May14) we discussed yesterday has reversed some of its recent incredible gains, trading higher in evening trade last night, but now trading down $.135 to +$.385. We believe this spread could head lower from these levels as well as the frost scare which caused NOV13 soybean prices to rise so much may have been a bit overdone. DEC13 cocoa futures are up $9/ton to $2521, after hitting a high of almost $2550 today. This could just be a slight pullback in an overall uptrend in the cocoa market. Recently, official data released by Ivory Coast showed bean deliveries in the world’s biggest producer were lower than forecast. DEC13 gold futures are up $8 today to $1373, staying below their recent high of $1384. It will be very interesting to see how the gold market responds to the FOMC minutes tomorrow which could potentially emphasize a September tapering. If the minutes don’t emphasize that, gold could rally.
Currencies: The SEP13 Euro currency seems very strong to us, trading up 80 ticks to 134.25. This is actually our key pivot level, and we have an upside target approximately 100 ticks higher at 135.25. The SEp13 USD futures have made a new low for the month today and are down 33 ticks to 80.93. Again, we believe tomorrow’s minutes and the Jackson Hole meeting might provide firmer clues as to the tapering ideas of the Fed. The SEP13 Aussie dollar is down 40 ticks today, actually initially trading much lower this morning. Overall, we believe 90 may serve as a good support level for this currency, and the reason for this most recent sell-off was the release of the RBA minutes. We believe the sell-off may be overdone.