The number of claims in the month ended Aug. 17 declined to 330,500 a week on average, the least since November 2007, a report showed today. The Conference Board’s index of leading economic indicators increased 0.6% in July. In addition, a gauge for China’s factory output unexpectedly showed expansion.
Equities: The SEP13 E-mini S&P 500 is up 14.25 points today as unexpected expansionary manufacturing data from China and Europe have given confidence to the markets that the global economic recovery/expansion could still have steam even with a potential reduction of U.S. Fed stimulus this fall. We believe the short term ceiling for this market could be at around 1660-1665. The market dipped all the way to 1632 after the minutes yesterday as investors got nervous how a potential September stimulus retraction could affect the overall economy. We believe this market might be range-bound until the next jobs report in the beginning of September.
Bonds: The SEP13 U.S. 30-year bond market is down 14 ticks this morning to 130’12. This market sold off to 129’28 yesterday, but has rallied back above the 130 level this morning, and to us the technicals look bullish on the short term. To us 131’06 is the key level for this market. For now, this level could serve as key resistance. If the bonds can stay above this level, we focus on our next upside market profile target at 132’06. Like the stocks, we believe the bonds could be in a range-trade until we see the next monthly jobs report. Longer term, we do believe the bonds could head lower.
Commodities: OCT13 Natural Gas has exploded higher today, trading up $.09 to $3.58. This market has been trending higher for the past two weeks, and is clearly above our pivot level of $3.40. This market has reached an intermediate target of $3.58, and our next target higher is $3.68. DEC13 gold seems like it is trying to break the $1375 level and go higher, but has not been able to maintain trading above that level. While we would not be surprised to see gold try to make a run to $1400 and shock the shorts, we still do not believe in a long lasting gold rally. NOV13 soybeans continue their strength today, trading near the $13 level, up all the way from the mid $11′s just a few weeks ago. We see $13.25 as key resistance but this rally could be running out of steam at this juncture.
Currencies: The SEP13 USD futures had a spike higher to almost 82 this morning on the jobless claims number, but have come back down to 81.51. Even with the FOMC minutes yesterday, providing a boost to the USD, we actually thought the USD would be stronger today. We are thinking the USD could be in the beginning stages of a longer term rally back to 85, but the potential problem with that idea is the current strength of the Euro currency, as their economy is really picking up as well. We are also watching the SEP13 Aussie dollar. This market really dipped hard yesterday, but has come back quickly on an unexpected strong manufacturing report out of China. We still believe the 90 level could be good support for the Aussie, and on a rally, we could see a potential test higher of a prior resistance level of 92.50.