Data today showed consumer spending in the U.S. rose less than forecast in July, as a separate report indicated consumer confidence dropped in August. The Obama administration plans to release today a declassified report outlining an intelligence analysis of evidence that the Syrian government used chemical weapons in an attack. An S&P index of homebuilders slipped 1.7%, bringing its decline this month to 8.5%.
Equities: The SEP13 E-mini S&P 500 is down 8 points to 1628.75. We have our next downside target at 1617, and a key resistance level at 1645. We believe this market could have further downside action, possibly even testing below the key 1600 level, and investors now have a “double-whammy” of potentially market-negative events: 1) potential tapering in September, and 2) potential military conflict in Syria. The market has made quite a run this year, and even a drop below 1600 would still have the market be in significant positive territory this year. We believe the 1700 area will hold as the high for 2013.
Bonds: The SEP13 US 30yr bond market is up 3 ticks today to 133’07. We believe this market could continue to rally on potential of a short-term weaking in the economy due to a recent rise in interest rates, but also due to a potential safe haven bid effect from the Syria situation. Really, the next major upside level we are watching is the 136 barrier. We could see a quick rally to that level if there is indeed news of a military strike in Syria.
Commodities: The amazing rally in the grains markets, specifically soybeans, has actually fizzled, and today the NOV13 soybeans are down $.15 to $13.53, after approaching the contract high of $14.10. Weather-driven markets can be notoriously volatile and fickle, and this is a case in point. DEC13 gold futures are back at the $1400 level, trading down $12 today. We hold bearish-neutral views on gold. Copper futures have slid recently, possibly another indication of a potentially slower-growth economy. OCT13 WTI Crude Oil has been in whip-saw mode with the uncertainty over the imminent possibility of a military event in Syria. Today OCT13 WTI is down $1.40 to $107.40
Currencies: The SEP13 US dollar popped higher today, and is up 15 ticks to 82.15. The SEP13 Euro continues its slide to 132.07. We do believe in the bullish US dollar story with a potential stimulus tapering later this year. Whether it occurs in September or December, we believe the US dollar might try to move back towards its 2013 high of 85. The SEP13 Aussie Dollar futures are down 30 ticks, and really have not been able to get any sustained upside momentum recently.We believe that this currency could actually head much lower. We have a target at the 83 level.