Sales of previously owned U.S. homes unexpectedly rose in August to the highest level in more than six years. The median price of an existing home increased 14.7% from a year ago to $212,100, today’s report showed. The benchmark S&P 500 index climbed 1.2% to a record yesterday as the Fed unexpectedly refrained from reducing bond buying. The Federal Open Market Committee said it wants more evidence of an economic recovery before tapering the stimulus. The Federal Reserve Bank of Philadelphia’s general economic index rose to 22.3 in September from 9.3 a month earlier.
Equities: The DEC13 E-mini S&P 500 (CME:ESZ13) is up 2 points today to 1720. We have 1719 as the key pivot level, and we would not be surprised to see the market head back down to 1706 as strong economic data today might remove some of the “unlimited-QE” euphoria which the FOMC statement stoked yesterday. Both the Philadelphia Fed manufacturing number and a key housing number came out higher than expected. Overall, the recent rally above 1700 is not necessarily surprising when given the no-taper announcement yesterday, but we wonder just how high the market can go in the face of a future tapering as well as a debt-ceiling debate. However, as we have been saying, we believe the overall trend of equities is higher.
Bonds: The DEC13 U.S. 30-year bond futures (CBOT:ZBZ13) rallied all the way up to 132’15 yesterday after the Fed’s no-taper announcement, but today are down 13 ticks to 131’17, likely due to the positive economic data releases today. We still believe the bonds could be headed higher over the short-term, however, one of our key targets of 132 was reached yesterday. Our pivot/support level to the downside looks to be 129’21. This would be our key line in the sand. The data going forward may be more important than ever as the Fed has clearly emphasized that they are not on a schedule of tapering, they are completely dependent on the incoming economic data.
Currencies: The major foreign currencies exploded higher yesterday, many of them breaking through some key levels. The DEC13 British pound has sold off today due to a lackluster retail sales number out of the U.K. The DEC13 euro is up 42 ticks today, after a big day yesterday, trading at 135.52, with our key upside target of 1.37 closer in sight. The DEC13 Aussie dollar continued its recent strength yesterday, but today is down 23 ticks to 94.25, after not being able to break higher through the 94.50 level. The EUR/GBP futures also rallied hard this morning, as the currencies went in opposite directions from each other.
Commodities: DEC13 gold (COMEX:GCZ13) was the big winner on the commodities board yesterday, trading up over $50. Today DEC13 gold is up to $1,363, after bouncing off of a key resistance level of $1,375. NOV13 WTI Crude oil (NYMEX:CLX13) also had a powerful kneejerk bullish reaction, but today is down $.42 to $106.85. DEC13 Cocoa futures (NYBOT:CCZ13) look to be in an uptrend, and are up $1 today to $2,624. $2,700 and then $2,766 are our next upside targets. The DEC13 corn contract is up $.05 today to $4.62, likely benefiting from the no-taper decision yesterday.