Data (GDP) showed the economy expanded at a faster pace in the second quarter (+2.5%) while concerns over an imminent military strike at Syria eased. Jobless claims in the week ended Aug. 24 dropped 6,000 to 331,000.
Equities: 1631 now could be viewed as key support for the SEP13 E-mini S&P 500 futures. Today this index is up 11.5 points to 1644, rallying on a higher than expected GDP data, plus continued good news on the weekly jobless claims front. The market could also be rallying due to concerns of a military strike this week diminishing with certain countries wanting incontrovertible proof of who exactly was behind the chemical weapons attacks. We have 1638 as another key support level, and our next upside target is 1652.
Bonds: Even though the stock market indices are all higher, the bond market is also higher today. The SEP13 30-year bond futures are up 6 ticks to 132’21, bouncing off of a key support level at 132. The bonds still look to be fairly strong, holding above the key 132 level. We believe that the bond market is higher today, even in the face of a higher GDP. We believe this is due to ongoing concerns regarding the Syria developments, and if indeed we do see military strikes in Syria, we believe the bonds could go much higher.
Currencies: We have seen a big rally in the SEP13 U.S. Dollar Index futures this morning, following the GDP release. The GDP release seemed to excite the USD bulls in thinking that after the concerning lackluster recent economic data from the US, the economy is indeed expanding, and thus could warrant a September tapering. The USD is very interesting to us, because it seems as though many analysts have been looking for the USD to rally, but the index has been somewhat weak. Today, it has caught a spark of life and is up 58 ticks to 82.04. We believe the next stop higher will be 82.50, and would not be surprised to see this index keep moving higher to approach the yearly high at the 85 area. The EUR/CHF spread has rallied today as a delay in military strikes against Syria has caused the Swiss Franc to decline more than the Euro.
Commodities: DEC13 gold futures have declined by $6 today to $1,412, while OCT13 crude oil is down about $.60 to $109.50. We believe overall that gold’s recent rally may be running out of steam, and might have a lot of trouble holding above its recent high of $1,430. Our line in the sand for gold is $1,417, if gold can stay above there, it might have a chance to rally to $1,450, but if not, we believe it could head back under $1,400, especially if the USD continues to rally. NOV13 soybeans are up around $.05 to $13.77, still well below their recent spike high to $14.09.